March 4, 2024 — Fed’s Preferred Inflation Index Running at 2.8%


The core personal consumption index (PCE), the Fed’s preferred inflation index, increased 0.4 percent In January and is up 2.8 percent from a year ago. The numbers met broad expectations. Headline PCE, which includes food and energy, was up 0.3 percent for the month and 2.4 percent year over year.

The January data reflects a normalization of the economy after covid, as consumers shift their spending from goods to services. Service prices were up 0.6 percent for the month, while the price of goods fell 0.2 percent. Economists were pleasantly surprised, as there were fears of an unexpected inflation rebound.

A Labor Department reported jobless claims for the last week of February were 215,000, slightly up from the 202,000 the week before, but not a significant change. Steady employment is one of the factors the Fed will take into consideration before deciding on amending interest rates.

The Atlanta Fed President Bostic and Chicago’s Goolsbee both spoke last week. They agree that rate cuts will likely happen this year. But seeing the path to the FOMC’s 2 percent inflation target is not linear, it is unlikely any cuts will occur before the summer.