APRIL 1, 2024 – CORE PCE INFLATION INDEX UP 2.8 PERCENT IN FEBRUARY
The Fed’s favored inflation measure, the core personal consumption expenditures index (excluding food and energy), increased 0.3 percent in February, or 2.8 percent on a 12-month basis. The data came was as expected. The PCE is seen to be a good gauge of long-term inflation pressures. The question now is if price growth in the spring will slow enough to justify the Fed’s cutting rates by the middle of the year.
Fed Chair Powell spoke to the San Francisco Fed on Friday, where he said he was happy to see inflation come in in-line with expectations. Powell reiterated the Fed’s stance that the officials need to see more inflation data that shows inflation is tracking down to the target of 2 percent. He further said they are not in an any hurry to cut rates since economic activity has been solid despite higher rates.
Powell refused to commit to a time when he expects to rates to come down. He hedged by saying the Fed is able to react to the data as it is reported. With a marked slowdown, rates could be cut faster and deeper, but they are willing to wait longer if inflation doesn’t abate. Traders are pricing in a 64 percent chance the Fed will move to lower rates by June.