Investing.com -- The "core" personal consumption expenditures (PCE) price index, an inflation metric closely monitored by the Federal Reserve, edged higher in February, providing the U.S. central bank with more reason for caution with rate cuts in the upcoming year.
The headline PCE price index grew 2.5% on an annual basis during the month, unchanged from January’s reading, and in line with economists’ estimates.
On a monthly basis, the index grew 0.3%, at the same pace as in January.
However, the widely-watched so-called "core" metric, which strips out more volatile items like food and fuel, came in at 2.8% annually, slightly above January’s revised higher 2.7%. Month-on-month, it grew 0.4%, above the 0.3% seem the previous month.
The numbers come as fears are growing that U.S. President Donald Trump’s aggressive trade agenda, which includes levies on both friends and adversaries alike, could refuel inflationary pressures and weigh on broader economic activity.
The rate-setting Federal Open Market Committee opted to leave borrowing costs unchanged at its latest meeting earlier this month due to uncertainty around Trump policy moves.
“Growth and consumption are likely to slow down on the back of a strong decline in consumer sentiment, caused by significant policy uncertainty,” said analysts at ABN Amro, in a note.
“A gradually cooling labour market and pockets of financial stress among households are likely to contribute to a slowdown in growth into 2025. Tariffs will be a further drag on growth in the course of this year, whilst also raising inflation. On the basis of current developments, our 2025 growth is downgrade to 1.7%, with a further revision likely following the April 2nd tariff plan. The tariff impact implies average PCE inflation of 2.7% in 2025, rising to 2.8% in 2026,” ABN added.