US Core PCE Inflation Surges to 2.8% in February, Exceeding Expectations and Impacting Federal Reserve Rate Cut Plans

The US core Personal Consumption Expenditures (PCE) price index, the Federal Reserve's preferred inflation measure, rose to 2.8% in February, exceeding economists' forecasts of 2.7%. This increase, detailed in a Commerce Department report released Friday, signals that inflation remains stubbornly elevated. Excluding volatile fuel and food prices, the core PCE increase contrasts with January's 2.6% annual increase. The rise in core inflation suggests the Federal Reserve may delay interest rate cuts. The PCE report also revealed a 0.8% jump in consumer incomes in February, while spending only increased by 0.4%. This led to a rise in the household savings rate to its highest level since June 2024. Concerns about the economic outlook, accelerating inflation, and equity market declines are weighing on consumer confidence. Economists suggest potential tariffs could further reignite inflation later this year.