U.S. Core PCE Inflation Rises, Keeping Fed Cautious on Rate Cuts

The core Personal Consumption Expenditures (PCE) price index, the Federal Reserve’s preferred inflation gauge, increased in February, signaling persistent inflationary pressures that could delay rate cuts.

Key PCE Inflation Data

• Headline PCE (YoY): +2.5% (unchanged from January, in line with estimates).
• Headline PCE (MoM): +0.3% (same as January).
• Core PCE (YoY): +2.8% (above January’s revised 2.7%).
• Core PCE (MoM): +0.4% (higher than January’s 0.3%).

Implications for Fed Policy

• Sticky inflation strengthens the case for the Fed to hold off on rate cuts in the near term.
• The Federal Open Market Committee (FOMC) left rates unchanged earlier this month, citing uncertainty over Trump’s tariffs.
• Trump’s aggressive trade agenda, including steep auto tariffs, has fueled concerns about inflation and economic stability.

Market Outlook

With inflation remaining above the Fed’s 2% target, investors will be closely watching future Fed communications for clues on the timing of potential rate cuts.