The core PCE in the US hit a four-year low in April! Inflation cools down, confidence rebounds, but The Federal Reserve (FED) warns of two risks.

U.S. core PCE annual growth hit a more than four-year low in April, consumer confidence picked up in May, and market optimism raised the probability of a September rate cut. But Nick Timiraos warns that tariff effects and a high base period will be potential risks to an inflationary rebound. (Summary: The US SEC issued "Ethereum pledge" :P oS Static non-securities trading, participants do not need to register) (Background supplement: US PCE "inflation heats up" Fed interest rate cut in February may wait, US stocks closed black, bitcoin risked 84,000) US inflation pressure showed signs of cooling, according to data released on Friday (5/30), the annual growth rate of the core PCE price index in April hit a new low since March 2021. At the same time, U.S. consumer confidence rebounded and a shift in optimism about long-term inflation sentiment reflected a gradual recovery in market sentiment. Beneath the data, however, economists see two potential risks. PCE falls to a four-year low The April data released by the US Department of Commerce showed that the annual growth rate of core PCE was 2.5%, which was not only in line with market expectations, but also significantly lower than the previous month's revised value of 2.7%. Headline PCE grew 2.1% year-on-year, below expectations of 2.2% and 2.3% in the previous month, and near its lowest point since the reopening of the economy last September. In terms of monthly growth, both core and overall PCE were 0.1%, in line with expectations. This data reinforces market expectations for a September rate cut, with the probability of a 1-yard rate cut rising to 57.8% and a 2-yard rate cut to 14.3%, according to the CME FedWatch tool. Two potential risks: tariff pressure and base period effects However, Nick Timiraos, a reporter for the Wall Street Journal, known as the "Fed sounding board", pointed out that there are two hidden concerns behind this "excellent" inflation report: With the "Liberation Day" tariffs taking effect, the market widely expects commodity price increases to accelerate in May and June. As inflation has cooled since the middle of last year, the base advantage compared to the same period last year is gradually disappearing, and it is difficult to surprise the data in the future. MarketWatch analyst Jeffry Bartash added that even if the recent court ruling limits the White House's power to impose tariffs, the legal game may drag on, and ultimately it remains to be seen how the Trump administration will follow. If companies pass on tariff pressure to consumers, the risk of an inflation rebound will rise again. Extended reading: Trump shouts that tariffs are not interrupted! WSJ: White House struggles with "dual-track plan" bypasses court ruling, tariffs remain in effect during appeal The core PCE price index rose 0.12% in April, a second straight mild monthly reading 12-month core inflation ticked down to 2.5%, the lowest since Feb 2021 Headline prices rose 0.10%, dropping the 12-month reading to 2.1%, near the post-reopening low recorded last September pic.twitter.com/gAbnrwxK9o — Nick Timiraos (@NickTimiraos) May 30, 2025 Long-term inflation expectations decline On the other hand, the University of Michigan survey, released simultaneously yesterday, showed that the final value of the consumer confidence index rose to 52.2 in May, better than the preliminary value of 50.8 at the beginning of the month, and also higher than market expectations. Although the overall level is still at a historical low, it has ended the trend of continuous decline. Consumer long-term inflation expectations for the next 5 to 10 years were also revised down to 4.2%, down significantly from 4.4% last month and falling for the first time this year; Inflation expectations for the coming year rose slightly to 6.6%, slightly higher than 6.5% in the previous month, but significantly lower than the preliminary value of 7.3%, indicating a slight return in confidence in price stability. It is worth mentioning that the recovery in confidence is mainly due to the improvement in the mood of Democrats and politically neutral voters, while Republican voters are still relatively pessimistic. In conclusion, despite better-than-expected inflation data and signs of recovery in consumer confidence, the U.S. economy has not yet emerged from uncertainty. If commodity prices rebound and tariff disputes rekindle, inflation expectations may rise again, further testing the Fed's policy path. 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