Europe is beating inflation. Why can’t America declare victory?

Inflation may have tumbled from multi-decade highs on both sides of the Atlantic, but progress has stalled in the United States, with the Federal Reserve now expected to start cutting interest rates well after its European counterpart.

Annual US inflation, as measured by the Fed’s preferred gauge, the Personal Consumption Expenditures index, came in at 2.7% in March, accelerating from 2.5% in February. The Fed aims to keep inflation at 2% over the longer run.

Another measure of US inflation, the Consumer Price Index, has shown the same upward trend: In March, the CPI rose 3.5% compared with the same month in 2023, up from 3.2% in February.
Meanwhile, among the 20 countries that use the euro, annual consumer price inflation has slowed steadily since the start of the year. It stood at 2.4% in March.

The European Central Bank (ECB) looks set to start cutting interest rates in June, three months before the Fed is forecast to do the same, based on market expectations.

There are even indications that the Fed may do something that, until quite recently, seemed inconceivable — raise the cost of borrowing. Fed Governor kraken marketplace Michelle Bowman said earlier this month that she would favor a rate hike "should progress on inflation stall or even reverse."