US Inflation Sees Moderate Increase in February

In February, prices in the United States experienced a moderate rise, with the cost of services, excluding housing, showing a notable slowdown. This has kept market speculations alive regarding the possibility of the Federal Reserve’s first interest rate cut in June.

The Personal Consumption Expenditures (PCE) price index, which is the Fed’s preferred measure of inflation, increased by 0.3% in February. This figure, although slightly lower than the upwardly revised January figure of 0.4% (previously 0.3%), remained below the consensus of 0.4%.

Looking at the annualized data, February’s PCE inflation showed a 2.5% advance, in line with expectations, following a 2.4% increase in January. Meanwhile, the core PCE price index, which excludes volatile food and energy components, recorded a 2.8% year-on-year increase in February, down from 2.9% in January.

Consumer spending, a significant driver of the US economy, saw a notable surge of 0.8% last month, compared to a 0.2% increase in January, contributing to an optimistic economic outlook.

The latest data indicates a easing of price pressures, albeit at a slower pace compared to the first half of the previous year. This delay has impacted the Fed’s efforts to push monthly inflation readings to 0.2% and suggests that inflation is gradually moving towards the central bank’s target.

US policymakers are anticipating three rate cuts this year, with increasing market expectations for the first reduction in June. This comes after the Fed raised interest rates by 525 basis points since March 2022 and maintained the borrowing costs within the 5.25%/5.50% range in recent monetary policy meetings.

However, Fed officials have reiterated that there is no urgency to cut the policy rate. Nevertheless, they have not ruled out the possibility of easing monetary policy later in the year, which contrasts with the more optimistic expectations prevailing in the financial markets.