The latest reading of the Federal Reserve’s preferred inflation gauge showed prices increased more than expected in February as inflation remained above the Fed’s 2% target. The release comes as investors have been closely watching data releases for signs of how President Donald Trump’s tariff policy is impacting the economy.
The “core” Personal Consumption Expenditures (PCE) index, which strips out food and energy costs and is closely watched by the central bank, rose 0.4% from the prior month during February, above economists expectations for a 0.3% increase. The reading was higher than the 0.3% increase seen in January.
Over the prior year, core prices rose 2.8%, above Wall Street’s expectations of 2.7% and higher than the 2.6% seen in January. On a yearly basis, overall PCE increased 2.5%, in line with economists expectations.
Friday’s release also showed personal spending increased 0.4% in February, below economists’ expectations of a 0.5% increase. February’s spending increase followed a surprise decline in January, the first in two years, which further fueled fears about the trajectory of US economic growth.
The release comes just one week after the Fed held interest rates steady at its March meeting and lowered its forecast for economic growth in 2025 while raising its inflation projection. The median forecast from officials calls for two interest rate cuts at some point this year.
U.S. Federal Reserve Chair Jerome Powell attends a press conference in Washington, D.C., the United States, on March 19, 2025. The U.S. Federal Reserve on Wednesday left target range for the federal funds rate unchanged at 4.25 percent to 4.5 percent, amid rising inflation concerns due to the Trump administration’s tariff policies. (Photo by Hu Yousong/Xinhua via Getty Images) · Xinhua News Agency via Getty Images
Josh Schafer is a reporter for Yahoo Finance. Follow him on X @_joshschafer.
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