Inflation continued to heat up in April, according to data released by the Commerce Department on Thursday.
The personal consumption expenditures price index rose 0.4% in April from the month before. On an annual basis, the PCE inflation rate hit 3.8%, up from 3.5% in March and the highest level since May 2023.
The core PCE rate, which ignores volatile food and fuel prices to provide a better sense of the underlying trend, rose 0.2% on a monthly basis and 3.3% on an annual basis — the highest annual reading since November 2023. The preferred inflation measure of officials at the Federal Reserve, the core rate shows clearly that inflation continues to run well above the central bank’s 2% target.
More than just an energy shock: The results were largely as expected, but that’s because analysts expect to see an increase in inflation driven by the war in the Middle East.
Heather Long, chief economist at Navy Federal Credit Union, said the data indicate that inflationary pressure is spreading throughout the economy. “50% of items in the CPI inflation report are growing at 3% or higher right now,” she wrote on X. “It's a telling metric... it underscores that this is more than just an ‘energy shock.’ The inflation problem is deeper and wider than that.”
A falling savings rate: Long noted that the report shows that the savings rate dropped sharply, falling from 5.5% in April 2025 to 2.6% in April 2026, one of the lowest readings in more than 20 years, suggesting that Americans are scrambling to maintain consumption levels as prices rise. And personal incomes actually fell slightly after adjusting for taxes.
“This is not sustainable,” Long wrote. “People continue to spend ... but their incomes are not keeping up.”
More pressure on prices: Dan North, senior economist at Allianz Trade North America, said that while the monthly increase in the core inflation rate was relatively modest, the trend is moving in the wrong direction. “[I]t’s the wrong way, and we think it will continue in the wrong way because there are so many inflation pressures in the pipeline,” he told the Associated Press.
Omair Sharif of Inflation Insights said in a note to clients that there was little good news in the report. “Core inflation is likely to be firmer next month and risks to the upside from the lagged impact of the energy surge remain in place,” he wrote, per Politico.
RSM Chief Economist Joseph Brusuelas also predicted that the inflationary trend will likely continue. “With pricing dynamics continuing to show upward pressure, we have not yet witnessed the peak in either top-line or core inflation,” he wrote in a research note.
Growing expectations for a Fed hike: Brusuelas noted that the Fed typically “looks through” or heavily discounts inflation caused by supply shocks, since it tends to be a one-time event, but the breadth of the growing inflationary wave may force Fed officials to reconsider, even with a dovish new leader, Kevin Warsh, now at the helm. Accordingly, concerns about persistent, elevated inflation could put interest hikes on the table over the next few months.
“Should the war in the Middle East not be wrapped up soon, the Federal Reserve will find it difficult to look through the increase in inflation driven by the supply shock that followed the outbreak of hostilities three months ago,” Brusuelas said. “While we do not anticipate a rate hike at the Fed’s next meeting on June 17, we do think that the July policy decision will be a live event.”
