Editor’s note: This article was updated to add more detail and context.

The Federal Reserve’s preferred inflation gauge rose further in April as the Strait of Hormuz energy shock continued to reverberate through the broader consumer basket, the Bureau of Economic Analysis reported Thursday.

The headline Personal Consumption Expenditure (PCE) price index rose 0.4% on the month, falling short of the 0.5% forecast and decelerating from March’s 0.7% increase.

Year-over-year, headline PCE accelerated from 3.5% to 3.8%, matching expectations and marking the highest reading since May 2023.

The core PCE price index which strips out food and energy, rose 0.2% month-over-month in April, missing the 0.3% consensus and decelerating from March’s 0.3% print.

On an annual basis, core PCE edged up from 3.2% in March to 3.3%, matching estimates and marking the highest reading since October 2023.

In a separate release, U.S. gross domestic product expanded at an annualized 1.6% pace last quarter, a downward revision from the initial 2% estimate but still an acceleration from the 0.5% pace seen in the fourth quarter of 2025.

Where Did Inflation Accelerate In April?

Energy once again did the heavy lifting.

The PCE index for gasoline and other energy goods surged 5.5% on the month, following a 20.9% spike in March, as the Strait of Hormuz disruption continued to push prices at the pump higher.

The broader energy goods and services category rose 3.9% in April.

Within services, housing and utilities accelerated to 0.6% from 0.3% in March, the largest monthly gain in the category in over a year.

Food services and accommodations rose 0.5%, while food and beverages purchased for off-premises consumption climbed 0.5% after a flat March.

Notably, the categories the Fed watches most closely for underlying stickiness cooled. PCE services excluding energy and housing — the supercore measure — rose just 0.1% in April, decelerating sharply from 0.3% in March, while financial services and insurance fell 0.4% and transportation services slowed to 0.4% from 1.2%.

Market Reaction

Markets read the PCE report as less hawkish than feared, with the soft 0.2% core print and cooling supercore overshadowing the hot headline.

U.S. equity futures rallied across the board.

S&P 500 futures rose 0.13% to 7,531, Nasdaq 100 futures jumped 0.80% to 30,008 — back above the 30,000 mark — while Dow futures edged up 0.02% to 50,628 and small-cap Russell 2000 futures gained 0.35% to 2,920.

On Wednesday, the SPDR Dow Jones Industrial Average ETF closed at record highs.

The U.S. Dollar Index tumbled 0.25% to 98.88, reversing part of the hawkish rally seen in recent days.

The 2-year Treasury yield, the maturity most sensitive to Fed expectations, fell to 4.043%, as traders pared some of the aggressive rate-hike pricing built up earlier in the month.

Gold – as tracked by the SPDR Gold Shares ( GLD ) – surged 1.21% to $4,427 per troy ounce, benefiting from the weaker dollar and softer yields, while WTI crude oil slipped 1.30% to $90.50 per barrel.

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