A measure of inflation that the Federal Reserve follows closely, it rose slightly less than expected in February, offering some hope that rate hikes help moderate rising prices.
The Commerce Department reported on Friday that the personal consumption expenditures (PCE) price index excluding food and energy rose 0.3% in the month. That was lower than the Dow Jones estimate of 0.4% and less than the 0.5% increase in January.
On a 12-month basis, core personal consumption expenditures rose 4.6%, a slight slowdown from the level recorded in January.
Including food and energy, main personal consumption expenditures rose 0.3% month-on-month and 5% annually, compared to 0.6% and 5.3% in January.
The weaker-than-expected data came in with monthly energy prices declining by 0.4% while food prices rose by 0.2%. Goods prices increased by 0.2%, while services prices increased by 0.3%.
In other data from the report, personal income increased 0.3%, just above the 0.2% estimate. Consumer spending rose 0.2% compared to an estimate of 0.3%.
Stock market futures held higher after the report while long-term Treasury yields fell.
Market prices Friday morning in the wake of the inflation report indicated a slight bias towards the Fed raising the benchmark interest rate by another quarter percentage point in May.
The Fed’s informal forecasts released last week indicated perhaps another hike this year and no cuts. However, traders are anticipating cuts this year, with year-end pricing for the federal funds rate at 4.25%-4.5%, half a point below the current target range.
While inflation has subsided in some areas, it has remained harmful in others. Shelter costs in particular have risen sharply. Despite this, Fed officials are looking for that increase and expect rents to slow through the year.
However, inflation is likely to remain well above the Fed’s 2% target through 2024, and officials have said they remain focused on lowering rates despite the current banking turmoil.
The data released on Thursday suggests that the problems at banks may also be at least under control. Borrowing through the Fed’s two emergency lending programs fell slightly last week, suggesting there was no frantic rush in liquidity for banks that may be running short of capital.
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