US Feb PCE costs index exhibits inflation image nonetheless a conundrum

(Reuters) – The Private Consumption Expenditures (PCE) value index elevated 0.3% in February after advancing by an unrevised 0.3% in January, the U.S. Commerce Division mentioned on Friday. Economists had forecast the PCE value index gaining 0.3%.

Within the 12 months via February, costs elevated 2.5%, matching January’s rise. Stripping out the risky meals and power parts, the value index rose 0.4% after an unrevised 0.3% advance in January. Within the 12 months via December, core inflation elevated 2.8% after rising 2.7% in January.

The U.S. central financial institution tracks the PCE value measures for its 2% inflation goal.

MARKET REACTION:

STOCKS: S&P 500 emini futures added to a slight loss and have been off 0.35%, pointing to a gentle open on Wall Road

BONDS: U.S. Treasury 10-year yield moved a bit decrease to at 4.3110% and the two-year yield was fractionally decrease at 3.98%

FOREX: The greenback index pared a bit, 0.13% firmer

COMMENTS:

WASIF LATIF, PRESIDENT AND CHIEF INVESTMENT OFFICER, SARMAYA PARTNERS, PRINCETON, NEW JERSEY

“Thesis that we’ve had for longtime continues to be intact – which is that inflation continues to be with and nonetheless lurking within the system. There are completely different the explanation why it’s stubbornly there, together with issues round tariffs and people conditions. You would say that a few of that was as a consequence of plenty of the shopping for by folks prematurely of the approaching tariffs. But it surely’s clear the tariff affect is driving inflation now – which in the end may slip into areas of the market together with cussed wages and so on.”

ELLEN ZENTNER, CHIEF ECONOMIC STRATEGIST, MORGAN STANLEY WEALTH MANAGEMENT, NEW YORK (by electronic mail)

“It seems to be like a “wait-and-see” Fed nonetheless has extra ready to do. Right this moment’s higher-than-expected inflation studying wasn’t exceptionally scorching, however it isn’t going to hurry up the Fed’s timeline for reducing rates of interest, particularly given the uncertainty surrounding tariffs.”

JORDAN RIZZUTO, CHIEF INVESTMENT OFFICER, GAMMAROAD CAPITAL PARTNERS, NEW YORK”This knowledge additional lends credence to the marginal shift we’re seeing in direction of a extra stagflationary surroundings. “If inflation is selecting up or working hotter coming right into a interval earlier than we have truly seen the affect from tariffs, that is fairly regarding. It additionally places the Fed in an excellent harder place since they’re strolling the tightrope between remaining restrictive sufficient to maintain inflationary pressures at bay and nonetheless working accommodative sufficient to stability and assist the financial image.

“We count on to see extra volatility on the entrance finish of the curve and to the diploma that we proceed to get hotter than anticipated knowledge. Shoppers are stocking up on sure objects forward of time in the event that they anticipate future value will increase. However that mentioned, the current weak point in client confidence suggests that they are restricted within the diploma to which they will pull plenty of purchases ahead.