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America's Enduring Price Puzzle: Why Inflation Remains Stubbornly High

  • Nishadil
  • August 30, 2025
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America's Enduring Price Puzzle: Why Inflation Remains Stubbornly High

The battle against inflation in the United States continues to be a persistent challenge, as the Federal Reserve's preferred gauge of price pressures remained stubbornly elevated in April. This latest data point has dampened hopes for imminent interest rate cuts, solidifying expectations that borrowing costs will stay high for longer than many had anticipated.

According to the Commerce Department's recent report, the personal consumption expenditures (PCE) price index, a critical measure closely watched by the Fed, rose by 2.7% on a year-on-year basis in April.

This figure mirrors the increase recorded in March, signaling a lack of significant progress in bringing inflation closer to the central bank's ambitious 2% target. When stripping out volatile food and energy components, the 'core' PCE price index, often seen as a better indicator of underlying inflation trends, also held steady at a 2.8% year-on-year increase for the second consecutive month.

A closer look at the month-over-month figures reveals a similar narrative.

The overall PCE price index increased by 0.3% in April, consistent with March's rise. While the core PCE showed a marginal improvement, climbing 0.2% month-on-month compared to 0.3% in March, it's not the decisive deceleration the Fed is seeking. Services inflation, particularly for housing and other core services, continues to be a significant driver of persistent price pressures, even as goods inflation shows signs of cooling.

This steadfast inflation picture arrives amidst a backdrop of moderating consumer spending.

Personal consumption expenditures, which account for over two-thirds of U.S. economic activity, rose by a modest 0.2% in April. This marks a notable slowdown from the 0.7% increase seen in March and suggests that higher interest rates are beginning to weigh on households' willingness to spend. Disposable personal income, the money left after taxes, also saw a marginal 0.2% increase.

For the Federal Reserve, these figures underscore the tricky tightrope it walks.

Policymakers have repeatedly stated they need .

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