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U.S. inflation was 2.7 percent in the year to April, according to a metric the Federal Reserve uses to set its target for price pressures.
Friday’s data on the personal consumption expenditure index was in line with economists’ expectations that inflation would be about the same as in March.
The central bank’s target for the headline PCE index is 2 percent.
Core PCE, which ignores changes in food and fuel prices, came in at 2.8 percent, in line with expectations.
The monthly headline figure was 0.3 percent and the key figure was 0.2 percent.
The central bank officials’ next interest rate-setting vote will be held on June 12. They are expected to say they need more data on inflation before cutting borrowing costs from their current 23-year high of 5.25 to 5.5 percent.
Investors believe the data leaves U.S. rate-setters on track to cut rates ahead of November’s U.S. presidential election for incumbent White House incumbent Joe Biden.
Markets expect a quarter-point cut this year, with a little more than a 50 percent chance of the first coming in September — the final policy decision before the election.
Data released by the Bureau of Economic Analysis showed that U.S. shoppers are keeping their spending under control, with real consumer spending falling 0.1 percent.
“Everything suggests that consumers should slow down — you’ve got high interest rates, the labor market is boiling and prices are rising,” said Sameer Samana, senior global market strategist at Wells Fargo. “If anything, it may appear a little later than we expected.”
The Fed is “likely to be somewhat relieved by this number, but by no means complacent,” said Dean Mackey, chief economist at Point72.
“It’s not easy to get high confidence in central bank policy because the central bank itself doesn’t know what it’s going to do,” Maki continued. “It really depends on these month-on-month core inflation prints, which have been very volatile in recent months.”
US stocks opened higher on Friday after the release of April’s PCE data, but reversed course as a sell-off led by technology stocks took hold. Wall Street’s S&P 500 fell 0.7 percent in lunchtime trading, while the tech-heavy Nasdaq composite fell 1.5 percent. Both indices were on trend for their first weekly decline since mid-April.
In government bond markets, the policy-sensitive two-year Treasury yield fell 0.04 percentage points to 4.89 percent, while the benchmark 10-year yield fell 0.05 percentage points to 4.51 percent. Falling yields reflect rising prices.
Additional reporting by Martha Muir in Washington
