Inflation Rose 2.8% In February, As Expected By The Fed

(CTN News) – Based on a measure the Fed considers its more important barometer, inflation rose in February in line with expectations, keeping it on hold until the Fed considers interest rate cuts.

According to the Commerce Department, personal consumption expenditures excluding food and energy increased 2.8% from a year ago. According to Dow Jones, both numbers were in line with expectations.

PCE rose 0.3% month-over-month and 2.5% year-over-year based on food and energy costs, compared to estimates of 0.4% and 2.5%.

There was no trading on Good Friday due to the holiday.

While the Federal Reserve takes both measures into account when making policy decisions, it believes that core inflation is a better measure of long-term. Inflation in the core PCE has not fallen below 2% since the Federal Reserve set its inflation target three years ago.

As far as I am concerned, there is nothing particularly surprising here. The Fed probably doesn’t want to see these numbers, but I don’t think anyone will be surprised when they return to work on Monday,” Victoria Greene, chief investment officer at G Squared Private Wealth. Everyone will pivot to labor pretty quickly and say that if we see some weakness and cracks over here, inflation and PCE won’t matter so much.”

With a 2.3% rise in energy costs, the headline reading climbed. As a result, the food index increased 0.1%. The goods index rose 0.5%, compared to the services index’s 0.3% increase. Over the past year, services rose 3.8% while goods fell by 0.2%.

Besides international travel and air transportation, there was also upward pressure on financial services and insurance. Vehicles and parts were the biggest contributors on the goods side.

Aside from the inflation increase, consumer spending increased by 0.8% on the month,

Well above the 0.5% estimate, possibly signaling additional inflation pressures. There was a slight softening of the 0.4% estimate for personal income growth to 0.3%.

It comes a little more than a week after the central bank kept its benchmark short-term borrowing rate steady and indicated it hadn’t seen enough progress on inflation to consider cutting it. This year and in 2025, members of the Federal Open Market Committee again anticipate three quarter-percentage point cuts in interest rates.

As of May 1, markets expect the Fed to remain on hold again, and then begin cutting on June 11-12. FedWatch, a measure of futures market action produced by CME Group, indicates that the FOMC is expecting to make three cuts this year.

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