Inflation was getting worse before Iran war. PCE price increases show how much.

The Personal Consumption Expenditures (PCE) price index, the Federal Reserve's preferred measure of inflation, showed an unwelcome acceleration in March. The core PCE, excluding volatile food and energy components, rose by 0.3% month-over-month, pushing the annual rate to 2.8%. This marks a significant increase from February and indicates that inflationary pressures were already building before the recent escalation of tensions in the Middle East. This data point is highly consequential for investors. It reinforces the Federal Reserve's cautious stance on interest rate reductions, making a June rate cut highly improbable and potentially pushing back the timeline for easing monetary policy to later in the year, or even 2025. Higher-for-longer interest rates imply continued pressure on corporate borrowing costs and could dampen economic growth, impacting equity valuations across various sectors, particularly growth stocks reliant on future earnings. Looking ahead, market participants will be keenly focused on the next Consumer Price Index (CPI) report and upcoming policy speeches from Federal Reserve officials. These will provide further clarity on whether the recent PCE acceleration is a temporary blip or a persistent trend, ultimately guiding speculation on the timing and magnitude of future interest rate adjustments. The full implications for investors will depend on follow-through in price action, positioning data and forthcoming policy or earnings catalysts referenced above.