Current:Home > StocksAn inflation gauge closely tracked by the Federal Reserve shows price pressures easing gradually -Capitatum
An inflation gauge closely tracked by the Federal Reserve shows price pressures easing gradually
EchoSense View
Date:2025-04-09 06:49:57
WASHINGTON (AP) — A measure of inflation that is closely tracked by the Federal Reserve slipped last month in a sign that price pressures continue to ease.
The government reported Friday that prices rose 0.3% from January to February, decelerating from a 0.4% increase the previous month in a potentially encouraging trend for President Joe Biden’s re-election bid. Compared with 12 months earlier, though, prices rose 2.5% in February, up slightly from a 2.4% year-over-year gain in January.
Excluding volatile food and energy costs, last month’s “core” prices suggested lower inflation pressures. These prices rose 0.3% from January to February, down from 0.5% the previous month. And core prices rose just 2.8% from 12 months earlier — the lowest such figure in nearly three years — down from 2.9% in January. Economists consider core prices to be a better gauge of the likely path of future inflation.
Friday’s report showed that a sizable jump in energy prices — up 2.3% — boosted the overall prices of goods by 0.5% in February. By contrast, inflation in services — a vast range of items ranging from hotel rooms and restaurant meals to healthcare and concert tickets — slowed to a 0.3% increase, from a 0.6% rise in January.
The figures also revealed that consumers, whose purchases drive most of the nation’s economic growth, surged 0.8% last month, up from a 0.2% gain in January. Some of that increase, though, reflected higher gasoline prices.
Annual inflation, as measured by the Fed’s preferred gauge, tumbled in 2023 after having peaked at 7.1% in mid-2022. Supply chain bottlenecks eased, reducing the costs of materials, and an influx of job seekers made it easier for employers to keep a lid on wage growth, one of the drivers of inflation.
Still, inflation remains stubbornly above the Fed’s 2% annual target, and opinion surveys have revealed public discontent that high prices are squeezing America’s households despite a sharp pickup in average wages.
The acceleration of inflation began in the spring of 2021 as the economy roared back from the pandemic recession, overwhelming factories, ports and freight yards with orders. In March 2022, the Fed began raising its benchmark interest rate to try to slow borrowing and spending and cool inflation, eventually boosting its rate 11 times to a 23-year high. Those sharply higher rates worked as expected in helping tame inflation.
The jump in borrowing costs for companies and households was also expected, though, to cause widespread layoffs and tip the economy into a recession. That didn’t happen. The economy has grown at a healthy annual rate of 2% or more for six straight quarters. Job growth has been solid. And the unemployment rate has remained below 4% for 25 straight months, the longest such streak since the 1960s.
The combination of easing inflation and sturdy growth and hiring has raised expectations that the Fed will achieve a difficult “soft landing″ — taming inflation without causing a recession. If inflation continues to ease, the Fed will likely begin cutting its key rate in the coming months. Rate cuts would, over time, lead to lower costs for home and auto loans, credit card borrowing and business loans. They might also aid Biden’s re-election prospects.
The Fed tends to favor the inflation gauge that the government issued Friday — the personal consumption expenditures price index — over the better-known consumer price index. The PCE index tries to account for changes in how people shop when inflation jumps. It can capture, for example, when consumers switch from pricier national brands to cheaper store brands.
In general, the PCE index tends to show a lower inflation level than CPI. In part, that’s because rents, which have been high, carry double the weight in the CPI that they do in the PCE.
Friday’s government report showed that Americans’ incomes rose 0.3% in February, down sharply from a 1% gain in January, which had been boosted by once-a-year cost-of-living increases in Social Security and other government benefits.
veryGood! (1864)
Related
- Matt Damon remembers pal Robin Williams: 'He was a very deep, deep river'
- Storied US Steel to be acquired for more than $14 billion by Nippon Steel
- Ukraine’s military chief says one of his offices was bugged and other devices were detected
- What does it take to get into an Ivy League college? For some students, a $750,000 consultant.
- Which apps offer encrypted messaging? How to switch and what to know after feds’ warning
- Bad coaches can do a lot of damage to your child. Here's 3 steps to deal with the problem
- A Black woman was criminally charged after a miscarriage. It shows the perils of pregnancy post-Roe
- Giving gifts boosts happiness, research shows. So why do we feel frazzled?
- USA men's volleyball mourns chance at gold after losing 5-set thriller, will go for bronze
- Ravens beat mistake-prone Jaguars 23-7 for 4th consecutive victory and clinch AFC playoff spot
Ranking
- Mega Millions winning numbers for August 6 drawing: Jackpot climbs to $398 million
- 36 days at sea: How these castaways survived hallucinations, thirst and desperation
- Horoscopes Today, December 17, 2023
- Houston Texans channel Oilers name to annihilate Tennessee Titans on social media
- Where will Elmo go? HBO moves away from 'Sesame Street'
- U.S. says its destroyer shot down 14 drones in Red Sea launched from Yemen
- Car plows into parked vehicle in Biden’s motorcade outside Delaware campaign headquarters
- NFL Week 16 schedule: What to know about betting odds, early lines
Recommendation
Billy Bean was an LGBTQ advocate and one of baseball's great heroes
Authorities: 5 people including 3 young children die in house fire in northwestern Arizona
AP Sports Story of the Year: Realignment, stunning demise of Pac-12 usher in super conference era
Amanda Bynes Reveals Why She's Pressing Pause on Her Podcast One Week After Its Debut
The Daily Money: Disney+ wants your dollars
Federal judge rules school board districts illegal in Georgia school system, calls for new map
Klarna CEO Siemiatkowski says buy now, pay later is used by shoppers who otherwise avoid credit
A mysterious Secret Santa motivated students to raise thousands of dollars for those in need