Core PCE rose 0.3%, less than expected

The Federal Reserve’s closely followed gauge of inflation rose slightly less than expected in February, giving some hope that interest rate hikes will help ease inflation.

The Commerce Department said on Friday that the price index for personal consumption expenditures, excluding food and energy, rose 0.3% for the month. That was 0.4% below the Dow Jones estimate and less than the 0.5% January increase.

On a 12-month basis, core PCE rose 4.6%, a slight decline from January.

Including food and energy, headline PCE increased 0.3% monthly and 5% annually, compared with 0.6% and 5.3% in January.

The softer-than-expected data showed monthly energy prices fell 0.4% and food prices rose 0.2%. Prices of goods rose 0.2%, while services rose 0.3%.

In other data in the report, personal income rose 0.3%, slightly higher than the 0.2% estimate. Consumer spending rose 0.2%, compared to the 0.3% estimate.

Stock futures were higher following the report, while longer-dated Treasury yields fell.

Market pricing on Friday morning followed the inflation report, with the central bank raising its benchmark rate by another quarter of a percentage point in May.

The central bank’s own unofficial projections released last week pointed to one more increase this year and no reduction. Still, traders expect cuts this year, with the final annual price for the federal funds rate at 4.25%-4.5%, half a point below the current target range.

Inflation will reduce in some areas, but it will be harmful in others. Accommodation costs in particular have risen sharply. Central bank officials, however, are keeping an eye on that increase and expect rents to decline for the rest of the year.

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However, inflation will remain above the central bank’s 2% target in 2024, and officials have said they will focus on lowering prices despite the current banking turmoil.

Data released on Thursday suggested that problems at the bank may also be at least under control. Borrowings through two emergency central bank lending programs eased slightly last week, indicating no frenzied liquidity crunch for undercapitalized banks.

This is breaking news. Check back here for updates.

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