Key inflation gauge stayed hot in February
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The Federal Reserve's go-to gauge showed inflation stayed hot in February, the Commerce Department said on Friday.
Why it matters: It is a warning to officials at the White House and the Fed, with aggressive tariffs expected to be unveiled next week that could stoke inflation and squeeze economic demand.
By the numbers: The Personal Consumption Expenditures price index rose 0.3% in February, the same pace as January. Compared to the same period a year ago, the PCE price index held at 2.5%.
- Excluding food and energy prices, the so-called core measure that's considered a better read of underlying inflation rose 0.4% in February, a pickup from the 0.3% gain in January.
- On a year-over-year basis, the core PCE price index rose 2.8%, compared to the 2.7% in January.
The other side: The firm inflation came alongside stronger consumer spending relative to early 2025.
- Personal consumption expenditures rose 0.4% last month, up from the 0.3% drop in January.
Zoom in: Incomes rose 0.8% — or 0.5% in real terms — a slightly faster pace from the January read that got a boost from Social Security inflation adjustments.
The intrigue: While important, the February PCE data is also a snapshot of a somewhat different environment than today.
- A number of airlines and retailers, for example, have warned they're experiencing consumer softness that didn't really start showing up until March.
The bottom line: Most recent consumer and business surveys show wariness about the U.S. economy, as Trump's tariff plans cause broad uncertainty, with expectations of steeper prices in the months ahead.
Editor's note: This story has been updated with a chart of PCE data.
