U.S. inflation jumps again and hits 6.4% rate, the Fed's favorite price gauge shows

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4. Key Fed Inflation Rate Hits 40-Year High; S&P 500 Slips

ECONOMY

Key Fed Inflation Rate Hits 40-Year High; S&P 500 Slips

JED GRAHAM 09:45 AM ET 03/31/2022

The inflation rate most closely watched by the Federal Reserve showed that price pressures accelerated to a new 40-year high, but prices excluding food and energy were a bit tamer than expected. The stock market didn't move much on the mixed personal consumption expenditures (PCE) price index, with the S&P 500 falling modestly after a Thursday's opening bell.

The PCE price index rose 0.6%, the biggest monthly gain since 2008. The annual inflation rate rose to 6.4%, highest since January 1982. Core prices, minus food and energy, rose 0.4% on the month. The annaul core inflation rate picked up to 5.4%, the most since April 1983.

Also on Thursday, the Labor Department said new claims for jobless benefits rose 14,000 to 202,000 in the week through March 26. However, layoffs are at historically very low levels. The prior week saw initial jobless claims hitting a 50-year-low 188,000. For perspective, the last time jobless claims were so low, the ranks of the employed were less than half of current levels.

Like a too-strong putt that overshoots the hole by a ways, today's inflation-rate update and tomorrow's jobs report could test the nerves of this S&P 500 rally. ... The stock market rally is built on hope that the Federal Reserve can rein in inflation without tipping the U.S. economy into a recession. But that sanguine outlook depends on how much and how fast the Fed has to tighten monetary policy. Scoring this week's data vs. some key markers laid out in the latest Fed economic projections will provide a guide as to how the Fed's hoped-for "soft landing" is shaping up.

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