The Fed Faces a Tariff-ied Consumer | S2 E026 | 03-28-25
The latest economic data shows inflation continuing to rise despite consumer spending weaknesses, creating a complex picture for markets and policymakers. Market reactions suggest growing concerns about economic growth taking precedence over inflation worries.
• Monthly PCE (the Fed’s preferred inflation indicator) showed core inflation rising 0.4%, exceeding expectations
• Year-over-year core PCE now at 2.8%, up from January’s 2.6%
• Personal income increased 0.8% while spending rebounded to 0.4% growth
• Service spending dropped for the first time in three years
• Consumer sentiment fell to its lowest level since November 2022
• One-year inflation expectations jumped to 5%, nearly double from the start of the year
• Long-term (5-10 year) inflation expectations hit 4.1%, the highest since 1991
• Markets focused more on growth concerns than inflation, with bond yields falling
• April 2nd marks an important date for reciprocal tariffs
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