Inflation ticker higher in February as consumer spending soared

Inflation rose for the second consecutive month in February, according to new federal data released Friday.

Personal Consumption Expenditures (PCE) Price Index, Inflation, the Fed’s preferred method of measuring inflation, rose 0.3% in February. The annual inflation rate rose to 2.4% in February, up 0.1 percentage point from January.

“Core” inflation, which excludes volatile food and energy prices, rose 0.4% in January to 0.3% in February. Compared to the same month last year, the core inflation rate has stabilized at 2.8% since January.

The slight rise in inflation in February was in line with economists’ expectations, but the 0.8% rise in consumer spending last month was much higher than experts expected. Analysts had expected consumer spending to rise 0.3% in February.

The Fed’s preferred measure of inflation is well within range of its long-sought 2% target, but the Fed held off on cutting rates again last week after stronger-than-expected jobs and inflation reports.

The central bank has raised interest rates from near zero to a range of 5.25-5.5% from March 2022 to July 2023. Inflation has fallen significantly since reaching 9% in June 2022, but remains below the Fed’s 2% inflation target.

Despite widespread fears of a recession last year, the labor market remains resilient, with unemployment at historic lows. The U.S. economy added 275,000 jobs last month, and the unemployment rate has remained consistently below 4% for the past two years.

Federal Reserve Chairman Jerome Powell warned in a press conference last Wednesday that inflation was on a “bumpy” and “uncertain” path toward its goal this month.

But in new economic forecasts released ahead of the press conference, Federal Open Market Committee (FOMC) officials said they expect three rate cuts in 2024, at the same level as expected at the end of 2023. I expected it to happen.

“We believe our policy rates have likely reached the peak of this tightening cycle, and if the economy continues broadly as expected, it would be appropriate to begin reducing policy restraint at some point this year,” Powell said. It’s very likely.”