Inflation News
April’s Personal Income and Outlays report at 8:30 AM ET failed to bring any negative surprises, at least in the key portions of the report. The closely watched Personal Consumption Expenditures (PCE) indexes that the Fed relies heavily on as their preferred gauge of inflation rose 0.1% last month, pegging expectations. On an annual basis, the overall reading rose at a 2.1% pace, down from March’s 2.3%. April’s year-over core PCE fell from March’s 2.7% to 2.5%. Both annual readings were slightly softer than forecasts, meaning in the Fed’s eyes inflation was weaker than thought. This is good news for bonds and mortgage rates because slowing inflation makes long-term securities, such as mortgage bonds, more attractive to investors.