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Rising energy prices contributed to last month's rise in annual inflation.
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CNN
—
The latest US inflation report showed that rising prices continue to weigh on US consumers.
The Federal Reserve's preferred measure of inflation, the Personal Consumption Expenditure Price Index, rose 2.5% in the 12 months through February, faster than the 2.4% rise in January. However, this was in line with the FactSet consensus prediction.
The annual rise in inflation was driven by a 2.3% rise in energy prices last month.
Commerce Department figures released Friday mean the Fed is further away from hitting its 2% inflation target. But Fed Chairman Jerome Powell wasn't worried about that.
Powell said Friday at an event hosted by the San Francisco Fed that the numbers were “very much in line with our expectations.” He added that it is generally a good thing if the data matches the central bank's forecasts.
The report also contained some welcome news.
Central bankers will find some comfort in the core PCE index, which excludes energy and food. The index slowed slightly to 2.8% from 2.9% in January. Also, on a monthly basis, the rate slowed to 0.3% from 0.5% in January. All core inflation indicators were in line with expectations.
Another bright spot was that prices rose by 0.3% for the month, down slightly from January's 0.4%. That was lower than expected by economists polled by FactSet.
The monthly price increase rate was 0.5%, higher than the 0.3% increase. At the price of the service. This is important because services inflation has been a major driver of economy-wide inflation over the past two years.
The Fed's historic rate hike, which pushed interest rates to their highest level in 23 years, had a limited effect on financial containment. Increase in price of services. Because these price increases were due to labor shortages, and employers had to raise wages to attract more workers. As a result, prices have also increased.
While recent economic indicators point to a slowdown in consumer spending, Friday's PCE statistics showed the opposite effect.
Personal consumption accelerated to 0.8% last month from 0.2% in January. This is the largest monthly increase in over a year.
While consumer spending is the main economic driver of the U.S. economy, its recovery may not be something to celebrate now.
“This highlights that consumers have overextended themselves, effectively withdrawing all $2.1 trillion in pandemic-related savings,” Kathy Bojancic, chief economist at Nationwide, said in a note Friday. “There is,” he said. This is evidenced by the fact that credit card debt is at an all-time high.
“As long as employment growth remains strong, it can support strong consumption, but consumers as a whole are not prepared for further weakening of the labor market,” he said.
The latest inflation numbers are unlikely to change the Fed's plans to eventually cut rates.
Central bankers, including Mr. Powell, have signaled that reaching 2% inflation will be a difficult journey.
Federal Reserve President Christopher Waller emphasized this point earlier this week in a speech titled “There's no need to rush yet.''
He said recent inflation measurements show that “to keep inflation on a sustainable trajectory towards 2%, we will likely need to keep rates at their current restrictive level for longer than previously thought.” It would be wise to maintain this stance.”
Fed officials continued to consider three rate cuts this year. Investors expect the first of these three to appear in June.