The core Personal Consumption Expenditure price index — the Federal Reserve’s preferred gauge of inflation — rose 0.3% in February and 2.8% year-over-year, according to the latest federal data.
The numbers were in line with analyst expectations — making it more likely that the central bank will keep interest rates at their current levels rather than rush into interest rate cuts that are eagerly anticipated by Wall Street investors.
The PCE index excludes volatile food and energy prices. When food and energy costs are factored in, headline PCE clocked in at 0.3% for February and 2.5% year-over-year — compared to estimates for 0.4% and 2.5%.
The main inflation gauge — the consumer price index — rose 3.2% in February — yet another stubbornly high figure that won’t inspire the Fed to slash interest rates in the short term.
February’s Consumer Price Index — which tracks changes in the costs of everyday goods and services — came in a tick higher than the 3.1% headline inflation figure economists surveyed by FactSet expected.
Consumer prices have not fallen year-over-year since President Joe Biden’s term began in January 2021.
The stock market was closed on Friday in observance of Good Friday.
Last week, the Federal Reserve kept decades-high interest rates unchanged following its meeting, though it made clear that it anticipates making three cuts this year.
Federal Reserve Chair Jerome Powell said recent high inflation readings had not changed the underlying “story” of slowly easing price pressures, but added that recent data also had not bolstered the central bank’s confidence that the inflation battle has been won.
Speaking after the two-day policy meeting, Powell said the timing of the much-anticipated reductions still depended on officials becoming more secure that inflation can continue to decline towards the Fed’s 2% target in an economy that continues to outperform expectations.
Investors, however, are betting that the cuts will begin in June.
Efforts by the Fed to tame inflation and steer a “soft landing” — bringing interest rates down without tilting the economy into a recession — have been complicated by the fact that unemployment is low while the US economy continues to hum along.
The US economy grew at a solid 3.4% annual pace from October through December, the government said Thursday in an upgrade from its previous estimate.
The government had previously estimated that the economy expanded at a 3.2% rate last quarter.
The Commerce Department’s revised measure of the nation’s gross domestic product — the total output of goods and services — confirmed that the economy decelerated from its sizzling 4.9% rate of expansion in the July-September quarter.
But last quarter’s growth was still a solid performance, coming in the face of higher interest rates and powered by growing consumer spending, exports, and business investment in buildings and software.
It marked the sixth straight quarter in which the economy has grown at an annual rate above 2%.
For all of 2023, the US economy — the world’s biggest — grew 2.5%, up from 1.9% in 2022.
In the current January-March quarter, the economy is believed to be growing at a slower but still decent 2.1% annual rate, according to a forecasting model issued by the Federal Reserve Bank of Atlanta.
Thursday’s GDP report also suggested that inflation pressures were continuing to ease.
The Federal Reserve’s favored measure of prices — called the personal consumption expenditures price index — rose at a 1.8% annual rate in the fourth quarter.
That was down from 2.6% in the third quarter, and it was the smallest rise since 2020 when COVID-19 triggered a recession and sent prices falling.
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