Inflation Gauge Rises: Fed’s Concerns Grow Amidst Hot Economic Data

2 mins read
Fed Chair Powell A 50 or 75 basis point hike seems likely at our next meeting

The Bureau of Economic Analysis (BEA) reported that the Federal Reserve‘s preferred inflation gauge rose by 0.3% in January, up from 0.1% the previous month, aligning with expectations amidst other reports of heightened inflation. The personal consumption expenditure (PCE) price index, as per BEA data, increased by 2.4% year-over-year, a slight dip from December’s 2.6%. The uptick in monthly PCE coincided with a consumer price index (CPI) report surpassing expectations, with a 3.1% year-over-year increase in January, triggering the largest single-day decline in the Dow Jones Industrial Average in nearly a year.

Energy costs saw a 1.4% deflationary trend for the month, according to the Bureau of Labor Statistics (BLS), exerting downward pressure on the PCE price index. Core PCE, excluding energy and food, rose by 0.4% month-over-month and 2.8% year-over-year.

The producer price index, a precursor to consumer inflation, exceeded expectations with a 0.3% increase in January.

Persistent high inflation raises doubts about potential Federal Reserve actions, with the federal funds rate currently set between 5.25% and 5.50%, the highest in 23 years. The majority of investors now anticipate no rate cuts until at least the Federal Open Market Committee’s June meeting, according to the CME Group.

Amidst disappointing CPI figures, investors increasingly speculate on a scenario where inflation remains elevated while economic growth outpaces expectations. CPI-measured inflation has surged by 18% since President Joe Biden assumed office in January 2021.

The White House has yet to respond to requests for comment from the Daily Caller News Foundation.


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