The Federal Reserve’s preferred inflation measure slowed in January, signaling that the recent uptick in price pressures could have peaked.
Monthly PCE inflation rose by 0.3 percent, unchanged from the previous period. Prices for goods rose by 0.5 percent, while prices for services edged upby 0.2 percent.
Inflation in core PCE, which strips the volatile energy and food components, fell to 2.6 percent from 2.9 percent.
From December to January, core PCE inflation jumped by 0.3 percent, up from 0.2 percent.
Core PCE inflation had flatlined over the past year, forcing monetary policymakers to suspend the U.S. central bank’s rate-cutting cycle.
Meanwhile, the U.S. government also reported that personal income advanced by 0.9 percent, rising by $221.9 billion. This topped the consensus estimate of 0.3 percent.
Personal spending slipped by 0.2 percent, falling short of economists’ expectations of a 0.1 percent gain.
A broad array of metrics suggests that the United States could be witnessing rebounding inflation, a trend that has been forming since September.
Headline inflation reports—the consumer price index and the producer price index—have fueled fears that inflation is either rebounding or proving to be stickier than expected.
Inflation in the GDP price index—a measure of changes in the prices of goods and services produced in the U.S. economy—was adjusted to 2.4 percent from 2.2 percent.
The annual inflation rate has risen for four consecutive months, reaching 3 percent in January, the highest since June.
It remains to be seen whether a break in climbing inflation is a blip on the radar, but other indicators are flashing red for longer-run inflation trends.
This month, price pressures at U.S. factories climbed to their highest levels since 2022 as input costs and selling price inflation surged.
Consumers’ inflation expectations have also gone through the roof as they assess changes to immigration and trade policies and possible government layoffs.
The February University of Michigan Consumer Sentiment Index’s one-year inflation outlook increased to 4.3 percent.
Likewise, the Conference Board’s Consumer Confidence Index’s one-year inflation forecast surged to 6 percent.
“The sentiment of at least some consumers has clearly turned for the worse,” Bill Adams, chief economist at Comerica Bank, said in emailed comments to The Epoch Times.
This could affect the wider economy as shoppers could pull back on their discretionary spending due to uncertainty, Adams noted.
“That will likely be a headwind to consumer spending and economic growth near-term, concentrated in parts of the country where people are most skeptical toward these policies,” he stated.
Most approve of Trump’s reciprocal tariffs and the president’s handling of immigration.
Additionally, most voters agree with having a government agency dedicated to efficiency efforts.
Torsten Slok, chief economist at Apollo Wealth Management, said, “There is a long list of forces pushing inflation higher.”
He alluded to various developments, including easy financial conditions, tariffs, and rising wage growth.
Financial markets and consumers fear Trump’s trade agenda could refuel inflation, though this has been a subject open to debate among economists and market watchers.
All of these developments have pushed the Federal Reserve to pause its easing cycle.
“The tariffs complicate the Fed outlook as they boost inflation expectations at a time inflation is already giving signs of heating up and will certainly limit the Fed’s ability to step in and assist,” Ipez Ozkardeskaya, a senior analyst at Swissquote Bank, said in a note emailed to The Epoch Times.
In January, the Fed left its key interest rate unchanged between 4.25 percent and 4.5 percent.
Monetary policymakers are waiting for progress on inflation before taking action.
Officials have also expressed concerns about tariffs but have recommended a wait-and-see approach before reaching conclusions and crafting policy responses.
The U.S. central bank will hold its next rate-setting two-day policy meeting next month, giving the institution ample time to digest more inflation data, employment numbers, and Trump’s policy changes.
Investors expect the Fed to hold for the second straight meeting.
