PCE inflation report watched closely by Fed ticks higher in February

An annual inflation measure watched closely by the Federal Reserve crept higher in February, its first rise in five months and a sign the central bank could remain wary about cutting interest rates too soon.

An underlying gauge of price gains dipped but stayed elevated. And household spending surged more than expected, a development that could keep inflation higher for longer.

Fed Chair Jerome Powell said last week the central bank would not overreact to disappointing inflation numbers so far this year, at least partly calming any jitters that could be set off by Friday’s report.

Consumer prices overall increased 2.5% from a year earlier, above the 2.4% rise in January but well below the 40-year high of 7% in June 2022, according to the Commerce Department’s personal consumption expenditures (PCE) index. It marks the first time annual PCE inflation accelerated since September.

On a monthly basis, prices increased 0.3%, down from a 0.4% jump the prior month, the PCE index shows. Both advances marked a notable pickup from a cooling trend late last year.

Protect your assets: Best high-yield savings accounts of 2023

What is the core PCE rate today?

A measure of “core” prices that strips out volatile food and energy items and that the Fed tracks even more closely also rose 0.3% on a monthly basis, down from 0.5% in January but at a faster pace than in late 2023. That nudged down the annual increase to 2.8% from 2.9%, still above the Fed’s 2% goal.

Is US inflation still falling?

Inflation slowed dramatically last year as COVID-related supply chain snarls eased. But goods prices that had been tumbling rose in February. Meanwhile, the cost of services such as rent, car insurance and transportation keep rising sharply, in part because of healthy employee wage hikes.

Barclays estimates core PCE inflation will decline just modestly by year’s end to 2.6%.

Will the Fed lower interest rates in 2024?

On its face, the accelerated price increases in both January and February could dissuade the Fed from trimming a key interest rate until officials are convinced that inflation is headed “sustainably” toward 2%.

But after a meeting last week, Fed Chair Jerome Powell said policymakers would not “overreact…to the two months of data.” Another inflation measure called the consumer price index (CPI), already had shown stepped-up price gains the first two months of the year.

Powell said the rise in January could be traced to challenges the government faces in seasonally adjusting the data. And the increase in February, though relatively hefty, was smaller than the previous month’s.

“The story is really essentially the same of inflation coming down gradually to 2% on a sometimes bumpy path,” Powell said. He added, however, that the Fed would also not “ignore” the worrisome numbers as it weighs when to start shaving rates.

The stock market soared after Fed officials continued to predict three rate cuts this year. The futures market is still betting the first rate decrease will come in June.

Since early 2022, the Fed has lifted its benchmark short-term interest rate from near zero to a range of 5.25% to 5.5% to fight a pandemic-induced inflation spike. Higher borrowing costs theoretically should curb economic activity and inflation. Officials have left the rate unchanged since July.

Is consumer spending high right now?

Household spending jumped a robust 0.8% after rising 0.2% the previous month. The increase was stronger than expected after retail sales were feeble in both January and February

Personal income rose 0.3%, up from 1% in January.

Consumption was strong last year, due largely to rapid wage growth, but appeared to be losing steam early this year amid high interest rates and inflation. Record credit card debt and rising delinquencies are straining low- and middle-income Americans.

Credit: Source link

What's Hot

Sony Singapore Now Lets Shoppers Pay in USDC Through Crypto.com

E25 & Nissan Chemical Corporation Complete Scoping Study for Tokyo Bay HPMSM Facility

Brian Armstrong Wants Onchain Interest Stablecoin Legislation

PCE inflation report watched closely by Fed ticks higher in February

Federal Reserve expected to keep interest rates steady but to tee up September cut

Asian markets extend Wall St rally after US data and ahead of Fed – Markets

US inflation drop puts spotlight on Fed

EUR/USD Price Forecast: Pair Hits $1.0869 Amid US Inflation Data and ECB Rate Hike Concerns

New Age | Global stocks climb as US inflation rate drops

US inflation rises moderately in June

Leave A Reply Cancel Reply

Markets reprice Bank of England rate cut bets

California labor wins big at Legislature- CalMatters

A New Kind of Student Loan Forgiveness

What to know about medications for children

Want To Get More For Your Sellers? List In Late May

What's Hot

Keep Reading

Leave A Reply Cancel Reply

Subscribe to Updates