Inflation In The US Slows Down; Consumer Spending Increases

(CTN News) – Despite a weak inflation increase in prices in February, outside of housing and energy, services costs slowed significantly. This kept the Federal Reserve’s June interest rate cut on the table.

The Commerce Department reported on Friday that consumer spending increased by the most in over a year last month, reinforcing the economy’s resilience. A persistently strong labor market has enabled the United States to outperform its global peers despite higher borrowing costs.

Jeffrey Roach, chief economist at LPL Financial in Charlotte, North Carolina, noted that core service inflation is slowing and will likely continue throughout the year. When the Fed meets in June, the data should be convincing enough to allow them to begin normalizing interest rates.”

In the past month, the personal consumption expenditures (PCE) price index rose 0.3%, according to the Bureau of Economic Analysis of the Commerce Department. In January, PCE price data was revised higher to show an increase of 0.4% rather than 0.3% as previously reported.

The cost of goods and services inflation increased by 0.5% last month,

Boosted by a 3.4% increase in gasoline and other energy products. Furthermore, prices for recreational goods and vehicles, as well as clothing and footwear, increased significantly. A decline in prices was observed for furnishings and household equipment, as well as other long-lasting manufactured goods.

PCE inflation increased by 2.5% in the twelve months ending in February after increasing by 2.4% in January.

A Reuters poll of economists predicted that the PCE price index would rise by 0.4% for the month. In spite of the fact that price pressures are subsiding, the pace has slowed from the first half of last year.

Following a 525 basis point inflation increase since March 2022, Fed officials left the US central bank’s policy rate unchanged in its current range of 5.25%-5.50% last week.

The Federal Reserve anticipates cutting rates three times this year. It is expected that the first rate reduction will take place in June according to the financial markets.

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