Key Fed inflation gauge rose 2.8% annually in February, as expected

Inflation
rose
in
line
with
expectations
in
February,
likely
keeping
the
Federal
Reserve
on
hold
before
it
can
start
considering
interest
rate
cuts,
according
to
a
measure
the
central
bank
considers
its
more
important
barometer.

The

personal
consumption
expenditures
price
index
excluding
food
and
energy
increased
2.8%
on
a
12-month
basis
and
was
up
0.3%
from
a
month
ago,
the
Commerce
Department
reported
Friday.
Both
numbers
matched
the
Dow
Jones
estimates.

Including
volatile
food
and
energy
costs,
the
headline
PCE
reading
showed
a
0.3%
increase
for
the
month
and
2.5%
at
the
12-month
rate,
compared
to
estimates
for
0.4%
and
2.5%.

Both
the
stock
and
bond
markets
were
closed
in
observance
of
the
Good
Friday
holiday.

While
the
Fed
looks
at
both
measures
when
making
policy,
it
considers
core
to
be
a
better
gauge
of
long-term
inflation
pressures.
The
Fed
targets
2%
annual
inflation;
core
PCE
inflation
hasn’t
been
below
that
level
in
three
years.

“Nothing
really
super
surprising.
Obviously
not
the
numbers
the
Fed
wants
to
see,
but
I
don’t
think
this
is
going
to
catch
anybody
off
guard
when
they
come
back
to
work
on
Monday,”
Victoria
Greene,
chief
investment
officer
at
G
Squared
Private
Wealth,
told
CNBC. “I
think
everybody
is
going
to
pivot
to
labor
pretty
quickly
and
say
well
maybe
if
we
see
some
weakness
and
cracks
over
here,
this
little
stickiness
in
inflation
and
PCE
isn’t
going
to
matter
as
much.”

Rising
energy
costs
helped
push
up
the
headline
reading,
with
a
2.3%
increase.
The
food
index
edged
up
0.1%.
Inflation
pressures
came
more
from
the
goods
side,
which
rose
0.5%,
compared
to
the
0.3%
increase
for
services.
That
countered
the
trend
over
the
past
year,
during
which
services
rose
3.8%
while
goods
actually
fell
by
0.2%.

Other
upward
pressure
came
from
international
travel
services,
air
transportation,
and
financial
services
and
insurance.
On
the
goods
side,
the
motor
vehicles
and
parts
category
was
the
biggest
contributor.

Along
with
the
inflation
increase,
consumer
spending
shot
up
0.8%
on
the
month,
well
ahead
of
the
0.5%
estimate,
possibly
indicating
additional
inflation
pressures.
Personal
income
increased
0.3%,
slightly
softer
than
the
0.4%
estimate.

The
release
comes
a
little
more
than
a
week
after
the
central
bank
again
held
its
benchmark
short-term
borrowing
rate
steady
and
indicated
it
still
has
not
seen
enough
progress
on
inflation
to
consider
cutting.
In
their
quarterly
update
of
rate
projections,
members
of
the
Federal
Open
Market
Committee
again
pointed
to
three
quarter-percentage
point
cuts
this
year
and
in
2025.

Markets
expect
the
Fed
to
remain
on
hold
again
when
it
releases
its
decision
on
May
1,
then
begin
cutting
at
the
June
11-12
meeting.
Market
pricing
is
in
line
with
FOMC
projections
for
three
cuts,
according
to
the
CME
Group’s
FedWatch
measure
of
futures
market
action.