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Tracking tariff announcement waves in core PCE

April 29, 2026

At first glance, it feels like we are right back where we were this time last year, facing upside inflation risks from a negative supply shock even as the labor market continues to soften. But a significant share of recent inflation reflects tariff effects rather than underlying price pressure. As Garrett Melson, CFA®, Portfolio Strategist at Natixis Investment Managers Solutions, notes, “backing out that contribution from the year over year pace of core PCE puts us at roughly 2.2% excluding tariff effects,” placing inflation within striking distance of the Fed’s 2% target.

  • Tariff effects are raising the level of prices without signaling renewed inflation momentum. 
  • Negative real income shocks from higher energy prices increase downside risks to consumption. 
  • Softer demand conditions reduce the likelihood that near term price pressures become entrenched.

PCE represents personal consumption expenditures price index.

Core PCE is a measure of U.S. inflation that strips out food and energy prices to reveal the underlying trend in what consumers pay for everything else.

CFA® and Chartered Financial Analyst® are registered trademarks owned by the CFA Institute.

This material is provided for informational purposes only and should not be construed as investment advice. The views and opinions contained herein reflect the subjective judgments and assumptions of the authors only and do not necessarily reflect the views of Natixis Investment Managers, or any of its affiliates. The views and opinions expressed may change based on market and other conditions. There can be no assurance that developments will transpire as forecasted, and actual results may vary

All investing involves risk, including the risk of loss. Investment risk exists with equity, fixed income, and alternative investments. There is no assurance that any investment will meet its performance objectives or that losses will be avoided. Investors should fully understand the risks associated with any investment prior to investing.

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