Inflation Remains Stubbornly High as Fed’s Preferred Gauge Rises 2.5 Percent

Prices surged higher again in February, casting further doubt on earlier predictions that inflation would continue to decline in 2024.

The personal consumption expenditures (PCE) price index climbed 2.5 percent over the 12 months through February, the Commerce Department said Friday, up from the 2.4 percent 12-month inflation recorded in the prior month. This was the first rise in 12-month inflation since September.

Core PCE prices, a metric which excludes volatile food and energy prices rose, 2.8 percent.

The annual figures were in line with the forecasts of Wall Street economists.

Compared with the previous month, the PCE index rose 0.3 percent. That was slightly below the expected 0.4 percent consensus forecast. Core PCE was also up 0.3 percent, matching the median forecast.

Unexpectedly, the prior months’ figures were revised up, showing inflation was stronger to start the year than previously believed. The 12-month overall PCE index is now seen as having risen 2.5 percent through January, up from 2.4 percent in the first estimate. The gain from December through January was revised from 0.3 percent to 0.4 percent.

Revisions took the 12-month core in January up from 2.8 percent to 2.9 percent and the one-month core figure 0.4 percent to 0.5 percent.

The uptrend reported in the PCE index echoes the findings of earlier consumer and producer price reports, both of which had previously indicated more pronounced inflationary pressures. Data from those reports feed into the PCE indexes, allowing economists to anticipate the PCE numbers that get released weeks later.

Jerome Powell, the chairman of the Federal Reserve, had hinted at today’s PCE numbers during his press conference last week.