Inflation cooled on an annual basis for the first time since 2020 in the gauge favored by the Federal Reserve.

Inflation, as measured by the personal consumption expenditures price index, decreased to 6.3% in the 12 months ending in April, according to data released by the Bureau of Economic Analysis on Friday morning. It was the first decline in the inflation rate since December 2020, when the pandemic was still ravaging the economy.

The monthly decline might be an early sign that inflation, which has caused tremendous hardship for families across the country and badly damaged President Joe Biden's popularity, has peaked.

Notably, core PCE, which strips out energy and food prices, tumbled for the third month in a row to 4.9%.

"The economy isn't out of the woods yet from the inflation threat, but at least the wolf isn't howling at the door, threatening to blow the house down," said Chris Rupkey, chief economist at FWDBONDS.


Biden said that April's decline was "a sign of progress."

"There is more work to do, and tackling inflation is my top economic priority. My plan is to give the Federal Reserve the independence it needs to do its job, lower families' costs, and lower the federal deficit," he said in a statement.

A driving factor behind lessening inflation is the Fed's monetary tightening. After years of ultra-loose monetary policy, with interest rates at near zero, the Fed is now working to raise rates quickly in an effort to crush the country's spiraling inflation.

The central bank increased its interest rate target by a quarter of a percentage point in March and subsequently hiked rates by half a percentage point earlier this month. The half-point hike is analogous to two simultaneous rate increases and shows that the central bank is growing increasingly more concerned about inflation.

Inflation tracked by the consumer price index, which is better known by the general public, increased 8.3% for the 12 months ending in April. Although that number is still exceedingly high, it was a slight decline from the month before, which experienced 8.5% annual inflation.


In other positive economic news, consumer spending grew 0.9% last month, the Commerce Department announced on Friday. Additionally, March's data were revised to show spending increasing by 1.4%.

Some forecasters fear that the Fed's interest rate hiking cycle will be too aggressive and knock the economy into a recession, which is why having positive consumer spending is so important. U.S. gross domestic product decreased in quarter 1 of this year by 1.5%, although most forecasters predict positive GDP growth this quarter.