Fed's Favorite Inflation Gauge Heats Up: Core PCE Rises More Than Expected

The Federal Reserve's preferred inflation measure, the Personal Consumption Expenditures (PCE) price index, showed signs of persistent inflationary pressures in February 2025. Core PCE, excluding food and energy, rose 0.4% month-over-month, surpassing expectations of 0.3%. The year-over-year PCE remained steady at 2.5%, while core PCE climbed to 2.8% annually. Real consumer spending inched up 0.1%, rebounding from January's revised -0.6% decline. The personal saving rate increased to 4.6% from 4.3% in January. These figures suggest that inflation remains stubbornly above the Fed's 2% target, potentially complicating future monetary policy decisions and rate cut expectations.

 

Source: Bureau of Economic Analysis, Federal Reserve Economic Data