(Daily Caller News Foundation) — The Federal Reserve’s preferred measure of inflation, the personal consumption expenditures (PCE) price index, surged past economists’ expectations in January, breaking a recent downward trend, according to the Bureau of Economic Analysis (BEA) Friday.
The PCE price index jumped by 0.6% on a monthly basis, and climbed to 5.4% on a year-over-year basis, up from 5.3% in December, the BEA reported. Economists had predicted the year-over-year number would continue to fall to 5% in January, but prices instead shot up at the highest levels since June, The New York Times reported.
Headline & core PCE inflation came in at 5.4% & 4.7% y/y, respectively. Higher than expectations and higher than previous month. First uptick in several months. A third rate hike in June is now fully priced in. pic.twitter.com/VD6xxsmorV
— Liz Young (@LizYoungStrat) February 24, 2023
“We are still quite some way from being able to declare victory over inflation,” Derek Holt, head of capital markets economics at Scotiabank, told The Wall Street Journal. The Federal Reserve has been aggressively raising interest rates since March 2022 in a bid to slow economic activity and reduce inflation, but several measures of inflation remain well above the Fed’s target rate of 2%, which is considered healthy for the economy.
The higher-than-expected reading makes it more likely that the Fed will hike interest rates by 0.5 percentage points at its March meeting, CNBC reported. February’s 0.25 percentage point hike brought the Fed’s target federal funds rate to a range between 4.5% and 4.75%, the highest they have been since 2007, according to the WSJ.
