Inflation is almost at 2%. Will that prompt a Fed rate cut?

According to new data from the U.S. Bureau of Economic Analysis (BEA), the Personal Consumption Expenditures price index for April rose 2.1% on an annual basis, down from 2.3% in March and closer to the Fed’s target rate of 2%. It rose 0.1% compared to March, when it was flat month over month.

So-called core inflation — which excludes volatile food and energy costs — rose 2.5% year over year, the lowest annual rate so far in 2025. Housing costs remain the highest driver of consumer spending, with a rise of $24.7 billion on a seasonally adjusted annual basis.

In a vacuum, the falling rate of inflation would signal that the Fed is ready to cut interest rates, as Chairman Jerome Powell has long said he wants to see inflation at 2% before doing so. 

But federal economic…