U.S. Stagflation Fears Rise Ahead Of Tariff Hit

2025-03-28 11:45:00 ET

Summary

• The core PCE deflator has come in hotter than predicted at 0.4% month-on-month, while real personal spending came in softer at just +0.1% MoM.
• Hot inflation and cooling consumer spending are trends that are likely to be intensified by President Trump's aggressive moves on tariffs and government spending cuts.
• Stagflation fears are rising and will constrain the Fed's ability to cut rates further.

By James Knightley

Well today's US data is only inflaming stagflation fears. The Federal Reserve’s favoured inflation measure, the core PCE deflator, has come in hotter than predicted at 0.4% month-on-month, while real personal spending comes in softer at just +0.1% MoM and January’s contraction is worse than previously thought - revised down to -0.6% MoM from -0.5%....

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