Market Relief: Inflation Under Control and Cooling Consumer Spending Boosts Treasury Bonds

A sense of relief swept through the markets following the release of the Federal Reserve's preferred measure of inflation, the core personal consumption price deflator, which met expectations. Prices rose 0.2% month-over-month in April and 2.8% year-over-year. Consumer spending slowed, increasing 0.2%, down from a downwardly revised 0.7% in March. The combination of lower consumer spending and no unpleasant surprises in inflation helped bond prices rise, where the 10-year Treasury note declined to 4.50% from 4.55% prior to the data.

The second estimate of GDP for the first quarter showed annualized growth of 1.3%, lower than the previously reported 1.6% and in line with expectations. The downward revision was mainly due to lower consumer spending. Meanwhile, imports increased.

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