inflation remains stubborn, at 2.5% over one year in February, according to the PCE index

inflation remains stubborn, at 2.5% over one year in February, according to the PCE index

2024-03-29 17:20:00

The rebound in inflation is confirmed in ANDUnited States, according to the PCE index, favored by the Fed. According to data published Friday by the Commerce Department, the rise in consumer prices rose to 2.5% year-on-year in February, compared to 2.4% in January, in line with market expectations. Inflation, however, slowed to 0.3% over one month, compared to 0.4% the previous month.

These figures are in line with analysts’ expectations, according to the consensus published by MarketWatch. “ The data is rather in line with our expectations “, Fed Chairman Jerome Powell said at a conference in California, ” It’s a good thing to see data aligning with our expectations ».

A rebound mainly driven by energy prices

So-called core inflation, which excludes food and energy prices, is falling, both over one month and over the year. Over one month, the underlying PCE index fell to 0.3%, once morest 0.5% in January, while over one year it fell to 2.8%, once morest 2.9% a month earlier.

And for good reason: the rebound in inflation is almost exclusively driven by energy prices, the latter increasing by 2.3% in February, while food – one of the main sources of inflation in in recent months – has seen its prices continue to slow down, with an increase of 0.1%.

Good news for France, inflation is slowing down once more in March

Nevertheless, ” the persistence of underlying inflation and in services, both in January and February, justifies the slightly less accommodating positions » from Fed officials in recent weeks, Nationwide chief economist Kathi Bostjancic said in a note.

The Fed wants to bring inflation to 2% by 2026

The PCE index is the inflation measure favored by the American central bank, the Fed, which wants to bring it down to 2%, an objective it plans to achieve in 2026. In this case, it follows the trend observed on the other CPI inflation index, on which Americans’ pensions are indexed, which had also seen a small rebound over a year but had accelerated over a month.

The two indices do not measure exactly the same things, with the CPI index in particular giving a significantly more important place in its evaluation of price developments to the amount of rents than does the PCE index. According to the CPI index, published Tuesday March 12 by the Labor Department, the increase in consumer prices was 3.2% over one year compared to 3.1% in January.

Inflation: the Central Bank of Sweden plans to ease its interest rate for the first time

The inflation curve is watched closely by the Fed, which has been fighting once morest its rise for more than two years. Its main tool to deal with this has been to raise rates between March 2022 and July 2023, pushing them up to the range of 5.25-5.50%, their highest level in 20 years.

The institution now plans to start lowering them this year. But its officials have largely procrastinated in recent weeks, saying they prefer to wait several months to be certain that inflation is not likely to rebound.

Three rate cuts expected in 2024

On Wednesday March 20, the Fed kept its rates unchanged, which remain at the highest level in more than twenty years. Overnight rates remain between 5.25% and 5.50%, the central bank announced in a press release, following a unanimous decision by the members of the Monetary Committee (FOMC).

But the members of the Fed, who significantly raised their projection of growth of the GDP (Gross Domestic Product) of the United States to 2.1% this year, instead of 1.4% previously, still foresee three rate cuts of ‘a quarter of a percentage point in 2024, an election year.

For 2025, however, the Committee is less optimistic, forecasting only three other rate cuts to bring them down to 3.9%, instead of four previously projected.

Italy: inflation accelerates but remains lower than that of the euro zone

Analysts anticipate a first rate cut at the meeting scheduled for mid-June, according to CME Group’s FedWatch aggregator, while the next Fed meeting, scheduled for April 30 and May 1, should once more result in a status quo.

Especially since consumption continues to hold up, according to data published by the Department of Commerce, since household spending increased sharply once more in February, by 0.8% over one month, compared to 0.3% in January. and while the markets were expecting a more moderate increase.

Nevertheless, the rise in income continues to slow down, which should lead to a gradual decline in consumption and a slowdown in the economy, one of the objectives of the sharp rate increase led by the Fed between March 2022 and July 2023 in order to bring inflation back towards its target.