A key inflation indicator tracked by the Federal Reserve remained stubbornly high in February, according to data released Friday, signaling persistent price pressures before geopolitical tensions with Iran intensified market volatility. The core Personal Consumption Expenditures (PCE) price index rose 0.3% for the month and 2.8% annually – matching analyst expectations but remaining well above the Fed’s 2% target.
The unchanged reading suggests inflation’s downward trajectory has stalled, complicating the central bank’s rate-cut calculus. “This confirms the ‘last mile’ of inflation fighting is proving difficult,” said a Treasury official speaking anonymously about sensitive economic data. Energy prices, which dipped 0.3% in February, are now under renewed upward pressure after recent Middle East developments.
Market analysts note the report captures pre-conflict conditions. “March data will likely show oil shocks filtering through,” warned a JP Morgan research note seen by SourceRated. The Fed has emphasized patience, with Chair Powell stating last week that policymakers need “greater confidence” in sustainable inflation decline before easing rates.
Financial markets now price in just two 2024 rate cuts versus six projected in January. Some economists argue current inflation stems more from service-sector wage growth than transient supply shocks. “Until we see shelter and labor costs moderate, the Fed’s hands are tied,” said a Brookings Institution economist.