The Commerce Department recently released data on the personal consumption expenditures price index (PCE), showing a 2.5% annual increase in February, meeting expectations. However, monthly prices only rose by 0.3%, slightly below economist estimates. Core PCE prices, excluding food and energy, saw a 2.8% annual increase and a 0.3% rise from the previous month.
Federal Reserve Chair Jerome Powell commented that the inflation data for February was positive and aligned with expectations. Consumer spending also saw a significant increase of 0.8% in February, surpassing economist predictions. Prices for goods rose by 0.5%, while prices for services increased by 0.3%.
Despite ongoing concerns about inflation, Federal Reserve officials decided to keep the federal funds rate unchanged at a range of 5.25% to 5.50% in a recent policy meeting. Inflation has not subsided as quickly as anticipated, leading to this decision.
Market expectations for interest rate cuts have decreased, with policymakers now predicting three cuts instead of potentially six for the year according to the CME’s FedWatch tool. The first rate cut is expected to occur in June, although no official timeline has been provided.
Christopher Waller, a member of the Federal Reserve Board of Governors, emphasized that there is no rush to cut the policy rate but did not rule out the possibility of a cut later in the year. The decision to keep interest rates steady reflects the central bank’s cautious approach to the current economic landscape.
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