Finance

Inflation indicators closely watched by the Federal Reserve show that price pressures continue to ease


WASHINGTON (AP) — An inflation gauge closely tracked by the Federal Reserve fell last month, suggesting price pressures continue to ease.

The government reported on Friday that prices rose 0.3% from January to February, slowing from a 0.4% gain the previous month, a potentially encouraging trend for President Joe Biden’s re-election campaign.

However, prices rose 2.5% in February compared with 12 months ago, slightly ahead of January’s 2.4% annual gain.

Excluding volatile food and energy costs, core prices rose 0.3% from January to February, down from 0.5% last month. Last month, core prices rose 2.8% annually, down from January’s revised 2.9%. Economists believe core prices provide a better gauge of the likely path of future inflation.

Annual inflation, measured by the Fed’s preferred indicator, fell sharply in 2023 after peaking at 7.1% in mid-2022. Supply chain bottleneck reliefreduce material costs, and A large influx of job seekers Make it easier for employers to control wage growth, one of the drivers of inflation.

Despite this, inflation remains stubbornly above the Federal Reserve’s 2% annual target, and polls show public dissatisfaction with high prices that are squeezing the interests of American families despite a sharp rise in average wages.

Appliances are displayed at a Costco warehouse on Sunday, March 17, 2024, in Sheridan, Colorado.  On Friday, March 29, 2024, the government released its latest monthly report on the Federal Reserve's preferred measure of inflation, a key measure of economic conditions. The Fed's efforts to curb inflation are succeeding.  (AP Photo/David Zalubowski)

Appliances are displayed at a Costco warehouse on Sunday, March 17, 2024, in Sheridan, Colorado. On Friday, March 29, 2024, the government released its latest monthly report on the Federal Reserve’s preferred measure of inflation, a key measure of economic conditions. The Fed’s efforts to curb inflation are succeeding. (AP Photo/David Zalubowski) (Associated Press)

The acceleration in inflation began in the spring of 2021, when orders at ports and cargo yards surged as the economy recovered from the pandemic recession. In March 2022, the Federal Reserve began to raise benchmark interest rates in an attempt to slow borrowing and spending and cool the economy. Inflation eventually raised interest rates 11 times to a 23-year high. These sharply rising rates, as expected, helped keep inflation in check.

However, rising borrowing costs for businesses and households were also expected to lead to widespread layoffs and tip the economy into recession, but that did not happen. The economy grows at a healthy rate every year Growth of 2% or above for six consecutive quarters. Employment growth is steadyThe unemployment rate has remained below 4% for 25 consecutive months, the longest such streak since the 1960s.

Slowing inflation combined with strong growth and employment has raised expectations that the Fed will hit its tough targets. “Soft landing” — Curbing inflation without causing a recession. If inflation continues to ease, the Fed may begin cutting key interest rates in the coming months. Over time, interest rate cuts will result in lower-cost loans for home and car loans, credit card borrowing and business loans. They could also help Biden’s reelection prospects.

The Fed is leaning toward favoring the government’s inflation measure released on Friday – the personal consumption expenditures price index – over the better-known inflation measure. consumer price indexThe PCE index attempts to explain changes in the way people shop when inflation rises. For example, it can capture when consumers switch from pricier domestic brands to cheaper store brands.

Overall, the PCE index tends to have lower inflation levels than the CPI, in part because rents have been so high and are twice as weighted in the CPI as the PCE.



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