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Core personal consumption expenditures, excluding food and energy, rose 0.4% in February compared to the preceding month and versus an estimate of 0.3%. According to a CNBC report, economists surveyed by Dow Jones anticipated the respective figures to be 0.3% and 2.7%.
The Federal Reserve’s preferred inflation gauge rose more than expected in February, while consumer spending was weaker than expected, according to data released by the Bureau of Economic Analysis.
Core personal consumption expenditures (PCE), which excludes food and energy, rose 0.4% in February compared to the preceding month and increased 2.8% annually. According to a CNBC report, economists surveyed by Dow Jones anticipated the respective figures to be 0.3% and 2.7%.
The sticky inflation numbers come as President Donald Trump’s planned tariffs are widely expected to push inflation higher.
During the March monetary policy announcement, the Fed kept its key borrowing rate targeted at 4.25%-4.5%, as expected, but raised its inflation expectations.
The central bank said it expects core PCE inflation to hit 2.8% in 2025, compared to a December projection of 2.5%. At the same time, the Fed lowered its growth estimate to 1.7% from the 2.1% estimated in December.
Notably, dot plot rate projections indicated that 11 of the 19 policymakers expect the central bank to cut rates by 50 basis points in 2025, translating into two quarter-point rate reductions this year. Previously, 15 officials had factored in at least two rate cuts.
Meanwhile, the Bureau of Economic Analysis also said consumer spending increased 0.4% in February, lower than a forecast of 0.5%.
Personal income increased $194.7 billion, or 0.8%, monthly in February, while personal outlays—the sum of PCE, personal interest payments, and personal current transfer payments—increased $118.4 billion..
Following the policy announcement, the SPDR S&P 500 ETF Trust (SPY) and the Invesco QQQ Trust, Series 1 (QQQ) traded in the red in Friday’s pre-market session.
However, retail sentiment surrounding these ETFs continued to trend in the ‘bullish’ territory.
Stocktwits users expressed skepticism on the possibility of rate cuts in 2025.
The SPY has lost 3% in 2025, and the QQQ is down over 5%.
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