An inflation indicator closely followed by the US Federal Reserve rose slightly less than expected in February, raising hopes that rate hikes will help moderate inflation.
The price index of personal consumption expenditure excluding food and energy rose 0.3% for the month, the Commerce Department reported on Friday. That was below the Dow Jones estimate of 0.4% and below January’s 0.5% gain.
On a 12-month basis, core PCE rose 4.6%, a slight slowdown from January levels.
Including food and energy, total PCE rose 0.3% monthly and 5% annually, compared to 0.6% and 5.3% in January.
In other data from the report, personal income rose 0.3%, slightly above the 0.2% estimate. Consumer spending rose 0.2% compared to the 0.3% estimate.
Stock market futures held higher after the report.
Market prices Friday morning after the inflation report indicated a slight bias that the Fed would hike interest rates by another quarter of a point in May.
The Fed’s own unofficial forecasts, released last week, pointed to perhaps another hike this year, not cuts. However, traders are expecting cuts this year, with the Federal Funds Rate ending the year at 4.25% to 4.5%, half a point below the current target range.
While inflation has subsided in some areas, it has remained damaging in others. Above all, the cost of accommodation has risen sharply. However, Fed officials are looking through this increase and expect rents to slow as the year progresses.
Still, inflation is likely to remain well above the Fed’s 2% target into 2024, and officials have said their focus remains on cutting prices despite the current banking turmoil.
Data released on Thursday suggested problems in the banking sector may also be at least under control. Borrowing from two Fed emergency lending programs eased slightly last week, suggesting there has not been a frantic surge in liquidity for banks that may be undercapitalized.
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