US inflation sees modest rise amid surging fuel prices

Latest government data released on Friday revealed a slight uptick in the US central bank's preferred measure of inflation, primarily driven by surging fuel prices. However, another key metric, excluding volatile food and energy prices, continued its downward trend.

Federal Reserve chair Jerome Powell, speaking at a conference in San Francisco, stated that the data aligns closely with the bank's expectations, indicating a steady trajectory toward its long-term inflation target of two percent, despite the recent increase.

The rise in inflation figures may raise concerns within President Joe Biden's reelection campaign, as he aims to assure wary consumers of the economy's positive trajectory leading up to November's vote.

According to the Commerce Department's statement, the Personal Consumption Expenditures (PCE) price index saw a 2.5 percent annual increase in February, a 0.1 percentage point rise from the previous month, consistent with economists' forecasts.

The increase in goods prices by 0.5 percent and services by 0.3 percent contributed to the overall inflationary trend, with much of the uptick attributed to energy prices, climbing 2.3 percent from January due to various factors, including OPEC+ alliance decisions.

On a monthly basis, PCE inflation slightly eased from January, showing a 0.3 percent rise. Analysts like Michael Pearce from Oxford Economics remain confident that inflation will trend lower over the year, citing labor market conditions, stable inflation expectations, and anticipated disinflation in rents.

Recent data shifts have led some Fed officials to reconsider their earlier predictions of three interest rate cuts this year, with Fed Governor Christopher Waller suggesting a reduction in the number or timing of rate cuts in response to recent economic indicators.

While headline inflation rose, the core inflation measure, excluding food and energy costs, showed a slight easing, with an annual increase of 2.8 percent and a 0.3 percent rise from January, according to the data.

Nationwide chief economist Kathy Bostjancic noted the resilience in core and services inflation, supporting the view of a delayed start to rate cuts, possibly in June or July.

Futures traders estimate a nearly 65 percent probability of rate cuts by mid-June, reflecting market sentiments regarding Fed policy shifts.

Personal income saw a modest 0.3 percent increase in February, following a 1.0 percent rise in January. However, higher consumer spending led to a decrease in personal savings as a percentage of disposable income, from 4.1 percent to 3.6 percent, indicating increased consumer confidence despite inflationary pressures.

Source: AFP