US core inflation rises above expectations in February – PCE

The US Personal Consumption Expenditures price index (PCE), Fed’s preferred inflation gauge, increased 0.3% month on month in February, unchanged from January figure and in line with expectations.

Annualized figure was also unchanged at 2.5% in twelve months to February and also met expectations.

Core PCE, stripped for volatile food and energy components, was up 0.4% last month from 0.3% increase in January, while year on year figure showed 2.8% rise from upwardly revised January’s 2.7% increase.

Hotter than expected core PCE inflation would add to expectations for the US Federal Reserve to keep interest rates unchanged for some time, as looming US reciprocal tariffs, due on April 2, are expected to boost inflation.

The separate report showed that US consumer spending, which accounts for more than two-thirds of economic activity, rebounded in February, rising by 0.4% after 0.3% decline previous month, but slightly missed expectations for 0.5% rise.

Higher prices were the main contributor to strong consumer spending, amid fears that the economy was facing a period of slower economic growth and threats that escalating trade tensions would further lift inflation.

The recent data showed that US business and consumer sentiment have deteriorated significantly, raising the risks of a recession, with more damage to the economy expected from the counter measures from US trade partners.