U.S. Fed's closely watched inflation measure rises 2.4 pct in January

U.S. Fed
# 01 March 2024 04:17 (UTC +04:00)

The U.S. personal consumption expenditures (PCE) price index, the Federal Reserve's preferred inflation measure, rose 2.4 percent in January, as inflation continued to cool amid high interest rates, the Commerce Department reported on Thursday, APA reports.

The latest figure came after the measure in October slowed to 3.0 percent year on year from 3.4 percent in September, before slowing to 2.7 percent in November and then to 2.6 percent in December, according to the Commerce Department's Bureau of Economic Analysis.

The PCE gauge takes into account how consumers change their behavior in light of higher prices, and is a broader measure of consumer behavior than the consumer price index (CPI).

The so-called core PCE price index, which strips out volatile food and energy prices, rose 2.8 percent in January from a year ago, down from 3.2 percent in November and 2.9 percent in December, but still well above the Fed's inflation target of 2 percent.

Twelve-month core PCE inflation peaked at 5.6 percent in February 2022.

"Thursday's data on the personal consumption expenditures price index were no worse than expected, but the strong reading for core prices wasn't good news for the Federal Reserve as it keeps pushing to bring inflation back to 2 percent," according to an article by Barron's, which covers U.S. financial information, market developments, and relevant statistics.

The "volatile" start to the year on inflation does lend support to the U.S. Federal Reserve's decision to push back on early rate cuts, the article noted.

At its latest policy meeting on Jan. 30-31, the Fed left interest rates unchanged at a 22-year high of 5.25 percent to 5.5 percent as inflation continued to cool, while avoiding the signal of an imminent rate cut going forward.

"Inflation is still too high, ongoing progress in bringing it down is not assured, and the path forward is uncertain," Fed Chair Jerome Powell said.

Powell said that reducing policy restraint "too soon or too much" could result in a reversal of the progress on inflation, and ultimately require even tighter policy to get inflation back to 2 percent.

At the same time, reducing policy restraint "too late or too little" could unduly weaken economic activity and employment, he added.

Consumer spending rose 0.2 percent in nominal terms in January, "but after adjusting for the largest monthly increase in prices since September, real spending actually fell 0.1 percent," Tim Quinlan and Shannon Seery Grein, economists at Wells Fargo Securities, wrote in an analysis.

"We expect consumer momentum remains intact and that a still-sturdy labor market should offer support to spending this year, even if that pace of spending is set to moderate," they said.

Noting that inflation problem is "not yet completely eradicated" and continues to dent purchasing power, the economists noted that on balance, today's report presents some "downside risk" to consumer spending estimates in the first quarter.