A favorite inflation metric used by the Federal Reserve struck a fresh high as American consumers continue to spend more to account for rising prices. These numbers arrive only weeks before the Fed is expected to initiate its next set of interest rate hikes to tame inflation.

On Friday, the Commerce Department released its figures for the Personal Consumption Expenditure (PCE) index and found that inflation rose by 5.2% in March when more volatile food and energy prices are included. This number was slightly lower than the one recorded in February but its year-on-year level rose by 6.6% compared to the 6.3% seen then when food and energy is accounted for.

Inflation has been the central economic issue facing the United States economy and American consumers for the better part of a year. The latest PCE reading illustrates this through the decline in real disposable income, which fell by about 0.4% in March after a slight 0.1% boost in February.

The main driver of inflationary pressure remains growth in energy prices, something that has only become a bigger challenge with the war in Ukraine. Of the $70.4 billion increase in spending on goods seen in March, the bulk of spending on nondurable goods was on energy products but it was accompanied by a decrease in spending on durable goods like cars.

According to the American Automobile Association, the average price for a gallon of gas across the country is $4.15 but it is close to or over $5 in some parts of the country.

These numbers take on more importance because they arrive as the Fed has been issuing increasingly hawkish signals that it is intent on more aggressive rate hikes to combat inflation.

Last month, the central bank launched a rate hike of a quarter of a percentage point for the first time in three years with more rate increases expected in the coming months. Minutes from a recent meeting of Fed officials also suggest it will proceed with a larger rate hike at their next meeting in May.

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Inflation