The core Personal Consumption Expenditure Price Index, the Federal Reserve’s preferred measure of inflation, rose 0.3% in February, up 2.8% from the same month a year ago, according to the latest federal data.
The figure was in line with analysts’ expectations and raised the possibility that the central bank would keep interest rates at current levels, rather than rush to cut rates, which Wall Street investors have been clamoring for.
The PCE index excludes volatile food and energy prices. Taking into account food and energy costs, the overall PCE amounted to 0.3% in February and 2.5% year-on-year. In comparison, estimates were 0.4% and 2.5%.
The consumer price index, a key inflation measure, rose 3.2% in February, which is also stubbornly high and will not motivate the Fed to cut rates in the near term.
The consumer price index, which measures changes in the cost of everyday goods and services, was slightly higher in February than the 3.1% headline inflation rate of economists surveyed by FactSet.
Consumer prices have not declined year over year since President Joe Biden’s term began in January 2021.
Stock markets were closed on Friday for Good Friday.
The Fed last week left interest rates unchanged at the highest rates in decades after its meeting, but said it expects to cut rates three times this year.
Federal Reserve Chairman Jerome Powell said recent high inflation rates did not change the underlying “story” of a gradual easing of price pressures, but recent statistics also showed that the fight against inflation has not changed. It added that this did not confirm the central bank’s confidence that it had won.
Powell, speaking after two days of policy meetings, asked whether officials could gain greater confidence that inflation could continue to fall toward the Fed’s 2% target in an economy that continues to outperform expectations. The timing of the long-awaited interest rate cut will still depend on the timing of the long-awaited rate cut, he said.
But investors are betting that interest rate cuts will begin in June.
The Fed’s efforts toward a “soft landing” that would curb inflation and lower interest rates without sending the economy into recession are complicated by the fact that while the U.S. economy remains strong, unemployment is low. There is.
The government said Thursday that the U.S. economy grew at a solid 3.4% annualized pace from October to December, an upward revision from its previous forecast.
The government had previously estimated the economic growth rate for the previous quarter to be 3.2%.
The Commerce Department’s revised measure of gross domestic product (total output of goods and services) confirmed that the economy has slowed from a blistering 4.9% expansion rate in the July-September period.
However, growth last quarter remained a solid performance in the face of rising interest rates, supported by increased consumer spending, exports and business investment in buildings and software.
This was the sixth consecutive quarter that the economic growth rate exceeded 2% annually.
The US economy, the world’s largest, grew by 2.5% in 2023, up from 1.9% in 2022.
According to a forecast model released by the Federal Reserve Bank of Atlanta, economic growth for the current January-March period is slowing, but still considered a healthy 2.1% annualized rate.
Thursday’s GDP report also suggested that inflationary pressures continue to ease.
The Fed’s preferred price index, called the Personal Consumption Expenditures Price Index, rose at an annual rate of 1.8% in the fourth quarter.
That was down from 2.6% in the third quarter and the smallest rate of increase since 2020, when the coronavirus triggered a recession and caused prices to fall.
with post wire
