Data released on Monday showed that U.S. core PCE deflator (Feb), the Fed’s preferred measure of inflation inched up 0.1%, below expectations for a gain of 0.2% and after rising 0.3% in Jan. The core PCE price index rose at an annualized rate of 1.7%, missing estimates for 1.8% and after a 1.7% gain a month earlier.
Personal income, meanwhile, rose by a seasonally adjusted 0.2%, above forecasts for a 0.1% gain and after rising 0.5% a month earlier, while personal spending inched up by a seasonally adjusted 0.1% last month, matching expectations.
“While the data from January and February may overstate any underlying firming, we do think that the trend in core inflation is picking up,” said Daniel Silver, an economist at JPMorgan in New York.
The slowdown in the monthly core PCE reading comes after Fed Chair Janet Yellen recently expressed skepticism over the sustainability of the gains in core inflation measures. Yellen told reporters this month that “there may be some transitory factors” behind the run-up in prices. The relatively soft inflation suggests the Fed will continue to gradually raise interest rates this year despite a tightening labor market.
Earlier today, Fed’s Williams was back on the wires making a case in favor of policy tightening. Policymakers said Fed may hike rates two times this year if conditions are met. “The economy performs as well this year, as it did in 2015, and inflation heads towards 2%, the economy could easily handle 2 more hikes this year”, Williams said.
The material has been provided by InstaForex Company – www.instaforex.com