A measure of inflation closely watched by the Federal Reserve is expected to have posted its biggest year-on-year rise since the 1990s, which could fuel new concerns about rising prices despite US central bank officials’ expectations that increases will be temporary. 

The commerce department’s core personal consumption expenditure index, which strips out volatile food and energy costs, is estimated to have risen 2.9 per cent last month compared to a year ago, according to a consensus forecast assembled by Refinitiv, a sharp increase compared to a 1.8 per cent annual rise in March. 

On a monthly basis economists estimate that the core PCE jumped 0.6 per cent last month, compared to 0.4 per cent in March.

This would bring the core PCE price index well above the Fed’s 2 per cent target, to levels that have not been recorded since the 1990s.

A surge in the PCE price index may raise new alarm about higher prices hampering the US recovery amid a burst of demand as the pandemic wanes. But Fed officials have signalled that they believe that the factors driving the change are mostly transient, such as heavy fiscal stimulus and supply-chain bottlenecks, and that inflation is likely to fall back later in the year. 

Since last year the Fed has adopted a more tolerant approach to inflation, striving to achieve moderately higher price rises compared to its target, in order to compensate for years of low inflation and push more forcefully for full employment.

But US central bank officials are also adamant that they are prepared to act if recorded inflation or inflation expectations appear to spiral out of control.