US Inflation Stalls as Fed’s Preferred Gauge Shows Little Progress

Core inflation, which omits food and energy, came in higher than the consensus forecast.

People shop at a grocery store in New York City on March 12, 2025. Samira Bouaou/The Epoch Times

Price pressures persisted in February as the core component of the Federal Reserve’s preferred inflation measure came in hotter than economists expected.

The Bureau of Economic Analysis reported that inflation in the February personal consumption expenditure (PCE) price index was unchanged at 2.5 percent.

PCE inflation rose by 0.3 percent for the third consecutive month.

Prices for goods jumped by 0.2 percent, while services inflation surged by 0.4 percent.

Core PCE inflation, which removes the volatile energy and food prices, ticked up to 2.8 percent from an upwardly adjusted 2.7 percent in the previous month.

On a monthly basis, core PCE rose at a higher-than-expected pace of 0.4 percent, up from 0.3 percent in January.

The U.S. central bank places more weight on PCE because it accounts for a broader range of goods and services, focuses less on housing, and adjusts for changes in consumption patterns.

In other related data, personal income surged by 0.8 percent, topping the consensus forecast of 0.4 percent.

Personal spending advanced at a smaller-than-expected rate of 0.4 percent following a 0.3 percent decline to kick off 2025.

U.S. stocks changed little in premarket trading after the latest inflation report. The leading benchmark averages were down slightly before the opening bell.

Yields on U.S. Treasury securities were mainly in the red, with the benchmark 10-year falling toward 4.3 percent.

The U.S. dollar index, a gauge of the currency against a weighted basket of foreign currencies such as the British pound and Canadian dollar, kept its early gains intact.

The index is poised for a weekly increase of 0.3 percent but is down by nearly 4 percent this year.

“The market should take this number in stride as all traders focus on ... tariff news going forward,” Jay Woods, chief global strategist at Freedom Capital Markets, said in a note emailed to The Epoch Times.

“Overall, what tends to be a key inflation point will likely get lost in the shuffle due to its timing.”

President Donald Trump announced 25 percent tariffs on foreign automobiles and car parts on March 26. He also signaled additional levies on lumber, pharmaceuticals, and semiconductors.

This comes ahead of the April 2 reciprocal tariffs that the president has hyped as the United States’ “liberation day.”

The Inflation Outlook

While the past couple of inflation reports have signaled renewed progress, the Fed expects persistent price pressures this year—and the February PCE report will likely force officials to remain cautious.

According to the updated Summary of Economic Projections, the monetary authorities forecast the median PCE inflation rate to be 2.7 percent, up from September’s expectation of 2.5 percent.

Core PCE inflation is also being penciled in for 2.8 percent, up from the previous prediction of 2.5 percent.

Looking toward next month’s batch of readings, the Federal Reserve Bank of Cleveland’s Inflation Nowcasting model is signaling further improvement.

The consumer price index’s headline annual inflation rate could slow to 2.5 percent from 2.8 percent. Core inflation may dip to 3 percent from 3.1 percent.

In addition, PCE and core PCE inflation are expected to slow to 2.1 percent and 2.5 percent, respectively.

Various goods and services have signaled easing price pressures.

Wholesale egg prices, for instance, have plummeted by about 63 percent since reaching a peak earlier this month.

This could soon provide relief on the retail side after the cost of eggs soared by more than 10 percent in February.

A man shops at a grocery store during an egg shortage in New York City on March 12, 2025. Samira Bouaou/The Epoch Times

Gasoline prices have declined by 11 percent year over year, with the national average price for a gallon sitting at $3.16.

While industry experts expect a “spring spike,” the 3 percent drop in crude oil prices has eased pressures at the pump.

Shelter inflation has been another example of improvement, although its decline has been occurring gradually.

In February, the shelter index jumped by 4.2 percent over the past year, the smallest rise since December 2021. This was down from 4.4 percent in January.

Is this a new downward inflation trend or a blip on the radar?

Economic observers have debated whether Trump’s tariff plans will revive price inflation as they filter through the U.S. economy.

Federal Reserve Chairman Jerome Powell told reporters at the March post-meeting news conference that any tariff-driven inflation will be “transitory.”

The Summary of Economic Projections suggested that central bank policymakers are worried about upside risks to inflation and unemployment.

Appearing at the Boston Economic Club on March 27, Susan Collins, Federal Reserve Bank of Boston president, stated that a tariff-fueled inflation boost appears “inevitable.”

She noted that this will keep interest rates higher for longer.

“It looks inevitable that tariffs are going to increase inflation in the near term,” Collins said in a fireside chat.

“My kind of modal outlook would be that that could be short-lived with a continuation of some disinflation, but further in the future than I might have expected before.”

Officials voted to keep interest rates unchanged for the second straight meeting, at a range of 4.25 percent to 4.5 percent.

Reuters contributed to this report.