Fed's favoured inflation gauge ticks higher as fuel costs rise
Published: 05:03 PM,Mar 29,2024 | EDITED : 09:03 PM,Mar 29,2024
The Fed's favored inflation measure rose last month, fueled by higher energy costs.
The US central bank's favoured measure of inflation edged higher last month on the back of rising fuel prices, according to government data published on Friday, but a metric stripping out volatile food and energy prices continued to ease. The data suggest inflation is still broadly on the Federal Reserve's bumpy path towards its long-term target of two percent, despite the recent uptick.
But the higher top-line figure will likely cause concern at President Joe Biden's re-election campaign, as the Democratic incumbent seeks to convince still-skeptical consumers that the economy is heading in the right direction ahead of November's vote.
The personal consumption expenditures (PCE) price index rose at an annual rate of 2.5 per cent in February, up 0.1 percentage points from a month earlier, the Department of Commerce said in a statement.
The figure is in line with the median forecasts in a survey of economists conducted by Dow Jones Newswires and The Wall Street Journal. Goods prices rose 0.5 per cent last month, while the costs of services increased by 0.3 per cent.
Much of the February increase in the cost of goods came from energy prices, which rose 2.3 per cent from January. On a monthly basis, PCE inflation eased slightly from January, rising by 0.3 per cent.
'The loosening of labour market conditions, stable inflation expectations and likely disinflation in rents to come all make us confident that inflation will still trend slightly lower over the course of this year,' Michael Pearce from Oxford Economics wrote in a note to clients.
'That should be enough to give the Fed confidence to begin removing some of the policy tightness later this year, though the resilience of the real economy means policymakers are in no rush,' he added.
Recent data has led some Fed officials to question policymakers' recent prediction of three interest rate cuts this year, as the US central bank pivots from tightening to loosening monetary policy.
'In my view, it is appropriate to reduce the overall number of rate cuts or push them further into the future in response to the recent data,' Fed Governor Christopher Waller told a conference in New York on Wednesday.
But the higher top-line figure will likely cause concern at President Joe Biden's re-election campaign, as the Democratic incumbent seeks to convince still-skeptical consumers that the economy is heading in the right direction ahead of November's vote.
The personal consumption expenditures (PCE) price index rose at an annual rate of 2.5 per cent in February, up 0.1 percentage points from a month earlier, the Department of Commerce said in a statement.
The figure is in line with the median forecasts in a survey of economists conducted by Dow Jones Newswires and The Wall Street Journal. Goods prices rose 0.5 per cent last month, while the costs of services increased by 0.3 per cent.
Much of the February increase in the cost of goods came from energy prices, which rose 2.3 per cent from January. On a monthly basis, PCE inflation eased slightly from January, rising by 0.3 per cent.
'The loosening of labour market conditions, stable inflation expectations and likely disinflation in rents to come all make us confident that inflation will still trend slightly lower over the course of this year,' Michael Pearce from Oxford Economics wrote in a note to clients.
'That should be enough to give the Fed confidence to begin removing some of the policy tightness later this year, though the resilience of the real economy means policymakers are in no rush,' he added.
Recent data has led some Fed officials to question policymakers' recent prediction of three interest rate cuts this year, as the US central bank pivots from tightening to loosening monetary policy.
'In my view, it is appropriate to reduce the overall number of rate cuts or push them further into the future in response to the recent data,' Fed Governor Christopher Waller told a conference in New York on Wednesday.