Inflation ticked up in February, according to federal data released Friday.
The personal consumption expenditures price index, the Federal Reserve’s preferred way to measure inflation, rose 0.3 percent in February. The annual inflation rate rose to 2.5 percent in February, up 0.1 percentage points from January.
“Core” inflation, which excludes volatile food and energy prices, clocked in at 0.3 percent in February after rising 0.4 percent in January. Year-over-year, core inflation held steady at 2.8 percent from January.
“Price growth continues to slow, slowly. It’s a little like watching a kid do a long-distance run. From the unsustainable all-out sprint we witnessed peaking in mid-2022, to the sputtering tempos we’re witnessing now. Occasionally, there’s a brief quickening, but overall we’re losing steam,” said Elizabeth Renter, a data analyst at NerdWallet.
The slight February increase in inflation was in line with economist forecasts, but a 0.8 percent jump in consumer spending last month far exceeded expert projections. Analysts expected consumer spending to rise 0.3 percent in February.
When adjusting for inflation, spending rose 0.4 percent in February after dipping 0.2 percent in January.
Personal incomes rose in lockstep with inflation at 0.3 percent after a surprise 1-percent jump in January, which was more than double what economists had projected.
The Fed’s preferred inflation gauge is within striking distance of its long-sought 2 percent target, but the central bank held off once again on rate cuts last week following higher-than-expected job and inflation reports.
Between March 2022 and July 2023, the central bank hiked interest rates from near zero to a range of 5.25 to 5.5 percent. Inflation has fallen significantly since it topped 9 percent in June 2022, but it has not reached the Fed’s 2 percent inflation goal.
“To be clear, the Fed isn’t going to wait for inflation to actually hit 2% before they begin cutting rates. Rather, they want to ensure the price growth rate is headed there,” Renter said.
Despite widespread fears of a recession last year, the labor market has remained resilient, and unemployment is at historic lows. The U.S. economy added 275,000 jobs last month and the jobless rate stayed below 4 percent, where it has consistently remained for the last two years.
At a press conference last Wednesday, Fed Chair Jerome Powell warned this month that inflation was on a “bumpy” and “uncertain” path to its goal.
But in new economic projections released ahead of the press conference, Federal Open Markets Committee (FOMC) officials forecasted three rate cuts in 2024, on par with their projections at the end of 2023.
“We believe that our policy rate is likely at its peak for this tightening cycle, and that if the economy evolves broadly as expected, it will likely be appropriate to begin dialing back policy restraint at some point this year,” Powell said.
Updated at 9:13 a.m. EDT