US Inflation Gauge Supports Fed’s Patience With Rates

(CTN News) – There is no doubt that the Fed’s preferred measure of underlying US inflation remained uncomfortably high in February, which explains why central bankers are wary of cutting interest rates too soon if they do so.

As of today, the core inflation personal consumption expenditure price index, which excludes the cost of food and energy, is forecast to rise by 0.3% after posting its largest monthly increase in a year last month. Overall, the measure is expected to rise 0.4% over the past month, the highest level since September.

Thus, over the past three months, the annualized core price rate of growth has been running at the fastest pace since May. If we look at the core PCE price index on a six-month annualized basis, it would also appear to be accelerating.

In addition, some economists expect that January’s figures will be revised higher in light of recent reports on consumer and producer prices, which have been released by the government.

There is a striking contrast between this situation and that which occurred at the end of 2023, when inflationary pressures were beginning to show signs of returning to the Fed’s 2% target.

The Federal Reserve’s Chairman Jerome Powell, in his remarks after the Fed’s interest rates were held at the same level for a fifth meeting, emphasized the nature of the gradual, yet bumpy process of getting inflation back to its target. According to the official, so far this year, the price data have neither added to policymakers’ confidence nor weakened it, he said.

Strong inflation consumer spending growth and another solid increase in personal income are expected to be reported in the PCE report, which will be published on Good Friday when US equity and bond markets will be closed to observe the holiday.

Aside from the release of durable goods orders data on Tuesday, Monday Inflation will feature news on new-home sales for February, which is one of the upcoming economic releases for the holiday-shortened week.

In order to determine fourth-quarter gross domestic product, the government will release third-quarter income and corporate earnings figures on Thursday morning.

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