Inflation, measured by core PCE, rose 2.8% annually in February, on par with estimates. Both headline and core PCE increased 0.3% monthly.
Despite meeting expectations, the Fed remains likely to hold interest rates steady. However, rising consumer spending (0.8% monthly) could lead to additional inflation pressures.
The report indicates inflation remains sticky, potentially delaying Fed rate cuts expected for June.
The Federal Reserve is considering holding off on interest rate cuts due to sticky inflation. Former Fed Vice Chair Richard Clarida believes that if the Fed were focusing on the higher-than-expected Consumer Price Index, they wouldn't even be discussing rate cuts. He advises the Fed to be cautious and data-dependent, as inflation may not be decreasing as quickly as anticipated.
Despite global challenges, the US economy is still growing, with a 2.1% GDP projection for 2024. Immigration is boosting consumption and economic activity. The labor market remains strong, with low unemployment and high wage growth. However, inflation is still a concern, with prices continuing to rise. The Federal Reserve continues to raise interest rates to control inflation but is not expected to reduce rates significantly due to high government spending and immigration.
