Fed’s favored inflation gauge showed prices ticked higher in February

The Federal Reserve’s favorite inflation scale showed that prices rose in February at a pace that still exceeds the target level of the central bank amid its continuous efforts to reduce inflation.

On Friday, the Ministry of Commerce stated that the Personal Consumption Expenditure Index (PCE) increased by 0.3 % from the previous month and 2.5 % on an annual basis. These numbers were in line with the estimates of economists covered by LSEG.

Core PCE, which excludes flying food and energy prices, increased by 0.4 % for this month and 2.8 % over last year, which is slightly higher than 0.3 % estimates and 2.7 %, respectively.

Federal reserve policymakers focus on the main number of PCE as they try to slow the pace of prices to their 2 % goal, although they look at the basic data as a better indicator of inflation. The main title of January has not changed by 2.5 %, while Core PCE rose above 2.6 % last month.

The Federal Reserve leaves the main interest rate without changing amid uncertainty about the economy and inflation

The prices of goods increased by 0.4 % on an annual basis in February, a slower frequency than 0.6 % reported in January – although the price of goods was relatively flat or even a decrease in the previous months. Service prices increased by 1 % in February, which is a little slower than annual growth by 1.6 % last month.

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Wages and salaries increased by 0.4 % on a monthly basis in February, an increase of 0.2 % per month.

The personal savings rate as a percentage of available income was 4.6 % in February, an increase of 4.3 % last month and an increase of more than 3.3 % to 4.3 % was in the last half of 2025.

Trump is a federal reserve needle after not lowering prices

The report of the Ministry of Commerce comes as the Federal Reserve evaluates economic data before its next meeting in May, where it monitors inflation and the health of the labor market.

Federal Reserve Chairman Jerome Powell said at a press conference last week, when the Federal Reserve Bank held fixed prices for its second consecutive meeting, that the central bank is not leaving to reduce interest rates and will look forward to assessing the effect of the Trump administration tariff on inflation.

Federal Reserve Chairman Jerome Powell indicated that the Federal Reserve is not in a hurry to reduce prices as he monitors inflation and the health of the labor market. (Michael M. Santiago / Getty Images / Getty Images)

“It seems” waiting and seeing “the Federal Reserve is still more awaiting it,” said Ellen Zenner, the chief economist of Murgan Stanley. “The high inflation reading was not exceptionally hot today, but it will not accelerate the timeline of the Federal Reserve to reduce interest rates, especially given the uncertainty surrounding the definitions.”

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The market expects that the Federal Reserve will leave unchanged prices for the third time in a row when it meets in early May. The possibility of keeping fixed rates was just more than 90 % on Friday, an increase of more than 85 % per week, according to the CME Fedwatch tool.