US inflation rises moderately in February – PCE

US prices rose moderately in February and the cost of services excluding housing slowed considerably, keeping market expectations for Fed’s first interest rate cut in June on the table. 

The personal consumption expenditures (PCE) price index, Fed’s preferred inflation measure, rose 0.3% in February, compared to upwardly revised (0.4% from 0.3%) January’s figure and ticked below 0.4% consensus.

Annualized figure showed that February PCE inflation advanced 2.5%, in line with expectations, after increasing 2.4% in January.

The so-called core PCE price index, which excludes the volatile food and energy components, showed 2.8% increase year-on-year in February after rising 2.9% in January.

Consumer spending, which accounts for more than two-thirds of US economic activity, surged 0.8% last month after increasing 0.2% in January, adding to optimistic outlook.

The recent data suggest that price pressures are easing, though the pace has slowed from the first half of last year, delaying Fed’s attempts to push monthly inflation readings to 0.2%, and signal that inflation is on the way towards the central bank’s target.

The US policymakers anticipate three rate cuts this year, with growing expectations in the financial markets for the first rate reduction in June, after the Fed raised interest rate by 525 basis points since March 2022 and kept the borrowing cost unchanged at 5.25%/5.50% range in past couple of monetary policy meetings.

On the other hand, the Fed officials reiterated that there is no rush to cut policy rate but kept on the table possibility for easing its monetary policy later in the year, diverging from more optimistic market expectations.