Source: AFP
The U.S. central bank’s favored measure of inflation rose last month on rising fuel prices, government data showed on Friday, but the gauge that strips out volatile food and energy prices continued to decline.
The data show that inflation is still broadly on the Federal Reserve’s bumpy path to its long-term target of 2%, despite the recent pick-up.
But the higher headline number will likely cause concern for President Joe Biden’s re-election campaign as the Democratic incumbent tries to convince still skeptical consumers that the economy is headed in the right direction ahead of the November vote.
The personal consumption expenditures (PCE) price index rose at an annual rate of 2.5 percent in February, up 0.1 percentage point from the previous month, the Commerce Department said in a statement.
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The number is in line with the average forecast in a survey of economists conducted by Dow Jones Newswires and the Wall Street Journal.
Prices of goods rose 0.5% last month, while the cost of services rose 0.3%.
Much of the increase in goods costs in February came from energy prices, which rose 2.3 percent from January.
On a monthly basis, PCE inflation eased slightly from January, rising 0.3%.
“Easing labor market conditions, firm inflation expectations and potential deflation in rents make us all confident that inflation will continue to move slightly lower over the course of this year,” wrote Michael Pearce of Oxford Economics in a note to clients.
“This should be enough to give the Fed confidence that it will begin to ease some of the policy tightening later this year, although the resilience of the real economy means policymakers are in no rush,” he added.
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Source: AFP
Recent data has led some Fed officials to question policymakers’ recent forecast of three rate cuts this year as the U.S. central bank shifts from tightening to easing 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 recent data,” Fed Governor Christopher Waller said at a conference in New York on Wednesday.
Relaxation of “core” prices
While headline inflation rose last month, the closely watched measure of core inflation, which strips out volatile food and energy costs, eased slightly, rising 2.8% year-on-year and 0.3% from in January.
“The stability in core and services inflation readings in February and January warrants Fed officials’ mood to be less dovish of late,” Nationwide chief economist Kathy Bostjancic wrote in an investment note.
“It supports our view that the Fed is waiting until at least June to start cutting rates, with a July start increasing,” he added.
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According to CME Group data, futures traders are currently assigning a just under 65% chance that the Fed will have started cutting interest rates by mid-June.
After rising 1.0 percent in January, personal income rose 0.3 percent last month, according to the Commerce Department.
Personal savings as a share of disposable income fell sharply from a revised 4.1 percent in January to 3.6 percent in February, indicating that consumers are consuming more of their savings as prices continue to rise.
Inflation data is being watched closely by the White House as President Joe Biden seeks re-election in November
Source: AFP
