PCE Inflation Stayed Sticky
U.S. inflation was stickier than hoped going into April: the Fed’s preferred gauge, the personal‑consumption‑expenditures index, picked up in February even as consumer spending remained solid. Core PCE was about 3% in February and headline PCE rose 0.4% month‑on‑month — readings that make rate cuts less likely in the near term. (reuters.com) (cnbc.com) (cnn.com)
A price report that was supposed to calm markets did the opposite on April 9: the personal consumption expenditures index, the inflation gauge the Federal Reserve watches most closely, rose 0.4% in February, and the core version that strips out food and energy also rose 0.4%. (bea.gov) (cnbc.com) Over 12 months, headline personal consumption expenditures inflation was 2.8% in February, while core personal consumption expenditures inflation was 3.0%, still a full percentage point above the Federal Reserve’s 2% target. (cnbc.com) (bea.gov) The reason traders care more about this report than the better-known consumer price index is that the Federal Reserve uses personal consumption expenditures as its main inflation yardstick, and it leans especially hard on the core reading when setting interest rates. (bea.gov) (cnbc.com) Think of the monthly number as speed and the yearly number as distance: a 3.0% annual core rate looked slightly better than January’s 3.1%, but three straight monthly core readings of 0.4% tell the Federal Reserve inflation is still running too fast right now. (bea.gov) (reuters.com) Reuters reported economists say monthly personal consumption expenditures inflation needs to run closer to 0.2% for a sustained stretch to get inflation back to the Federal Reserve’s 2% goal, so 0.4% is roughly double that pace. (reuters.com) Consumers also did not show the kind of pullback that would ease price pressure quickly: consumer spending rose 0.5% in February after a 0.3% gain in January. (reuters.com) (cnbc.com) That matters because consumer spending makes up more than two-thirds of United States economic activity, so solid demand gives businesses more room to keep passing higher costs through to shoppers. (reuters.com) The older inflation report that households know best, the consumer price index, had looked cooler for February: it rose 0.3% on the month and 2.4% from a year earlier, with core consumer price index at 2.5%. The personal consumption expenditures report came in hotter, which is one reason Wall Street paid such close attention to it. (bls.gov) (cnbc.com) The Federal Reserve left its benchmark rate at 3.50% to 3.75%, and Reuters reported the latest inflation and spending numbers made near-term rate cuts look less likely. (reuters.com) There is one more catch in this report: the February data landed on April 9 because federal data releases were delayed by the 2025 government shutdown, and Reuters said economists expect March inflation to look worse because February does not fully capture the later jump in oil and gasoline prices. (reuters.com) (bea.gov) So the clean version is this: by the time April began, the Federal Reserve was already looking at core inflation stuck at 3.0%, monthly price growth stuck at 0.4%, and consumer spending still rising at 0.5%. That is not the setup for an easy spring rate cut. (cnbc.com) (reuters.com)
