Inflation still worse than federal goal, report shows

A key measure of inflation worsened in February, according to the Commerce Department. The Personal Consumption Expenditures index, or PCE index, measures the prices of goods and services purchased by U.S. consumers. In February of this year, the PCE index increased 2.5 percent from February of last year, according to a Bureau of Labor Statistics report Friday. The Fed’s target rate for inflation is around 2 percent, central bank officials have said. The PCE index in February was up only a thin fraction of a percentage point from the previous month. Minus food and energy expenditures, February’s PCE index increased 2.8 percent over the last year.

What does this mean for government monetary policy? Federal Reserve Chairman Jerome Powell said on Friday he was not surprised by the PCE data. “It’s good to see something coming in in line with expectations,” he added. The Fed has said it wouldn’t be ready to cut interest rates until it saw consistent evidence that inflation was sustainably reducing.

Dig deeper: Listen to Nick Eicher’s discussion with David Bahnsen on The World and Everything in It podcast about the inflation cycle.