The last reading of federal federal reserves have shown that prices have increased on a monthly basis, but they have fallen from year to year, which should retain interest rates on hold when the central bank meets in March.
The “basic” expenditure index for personal consumption (PCE), which removes food and energy costs, increased 0.3% compared to the previous month during January, but that increase was in accordance with expectations. Prices increased by 0.2%in December.
On an annual basis, fundamental prices increased 2.6% compared to the year, which was also in line with expectations. This is reduced from an annual increase of 2.9% in December.
Data show a dimmer pace of prices for the month of January than a separate measure of consumer prices (CPI) index, which has shown the highest increase in basic prices since April 2023.
PCE data can offer more comfort to the Fed officials after the CPI data in January caused many policy creators to ask if reading was hot than expected to be ranked on the road or a new trend.
Officials are now looking for a clear line of trends that shows progress in returning inflation to their goal of 2% because they digest the effect of new economic policies from Trump administration on trade, taxes and immigration.
Reading the PCE inflation on Friday is the last officials of the Fed before being convened for his next meeting of politics on March 18 and 19.
The central bank is everything, but surely it will maintain rates for the second consecutive meeting this year after reducing rates by 100 base points at the end of 2024 during three consecutive meetings.
The markets are not priced in any case until June, as they also digest a survey this week, which showed that the short -term expectations of inflation increased while consumer confidence fell.
“The 2.6% annual inflation rate is still too hot for Fed’s desire and, with inflationial tariff measures, we stand in our opinion that reduction of rates this year are out of the table,” said Thomas Ryan, an economist of North America for capital economy.
The central bank “will be glad when inflation is cooling in January, but is worried about the prospect of prices,” added Bill Adams, a major economist for Comeric Bank.
President Richmond Feda Tom Barkin said on Tuesday that he wanted to keep the interest rates “modestly restrictive” until he gained more confidence, inflation does not return to the goal of 2%, a warning of the 1970 lessons learned.
President Kansas City Feda Jeff Schmid said on Thursday that he was becoming more cautious about inflation by continuing to decrease because the expectations of inflation recently increased.
