Fed’s Preferred Inflation Metric Rises Mildly, Spending Picks Up

What Happened?

The Federal Reserve's (Fed) preferred inflation metric, the core personal consumption expenditures (PCE) price index, rose by 0.6% in January.

Why is This Important?

This increase is slightly higher than the 0.5% increase in December and brings the annual inflation rate to 5.4%, well above the Fed's 2% target.

Additionally, consumer spending increased by 1.8% in January, indicating a strong economy amid rising inflation.

What Does This Mean for the Fed?

This data may prompt the Fed to raise interest rates more aggressively in the coming months to combat inflation.

The Fed has already raised rates eight times since March 2022, raising the benchmark federal funds rate from near zero to 4.5% to 4.75%.

What to Watch For

Investors and economists will closely monitor the Fed's next meeting in March for any signals about the pace of future rate hikes.

The Fed is also expected to release its latest economic projections and dot plot, which will provide insights into its expectations for inflation and interest rates.

Source: CNBC