Pressure on Fed increases with US inflation gauge set to rise again
The Federal Reserve’s preferred inflation gauge is expected to record another strong monthly gain, in the latest sign that the US central bank needs an ultra-easy monetary policy cut. has been in place since the pandemic began.
The core personal consumption spending price index is expected to increase by 0.5% in January, following a similar monthly gain in December, according to a consensus forecast compiled by Bloomberg.
The figure is expected to result in an annual increase of 5.2%, the fastest pace in about four decades and accelerating from the 4.9% increase recorded in December.
When volatile items like food and energy are factored in, the PCE is expected to grow 6% year-over-year, or 0.6% month-on-month.
Fed officials are monitoring inflationary Data is tight as they gauge the pace of rate hikes this year from near zero today.
Increased price pressure is expected to be accompanied by a 0.3% drop in personal income and a 1.5% increase in household spending at the start of the year.
The data will be released by the commerce department at 8:30 a.m. Eastern Time on Friday.
Data comes in the footsteps of Russia Ukraine’s military invasionthis leaves policymakers confused in discerning potential economic impacts.
Comments by some Fed officials as well as developments in Ukraine have softened speculation about the Fed raising interest rates by half a point in March. But the US central bank is still expected to conduct its first rate hike at its next meeting in the middle of next month. Markets are now anticipating five more quarterly corrections for the rest of the year.
Several officials have spoken out in recent days about potential risks to economic growth and the inflation outlook.
Energy prices have skyrocketed since entering Ukraine, with Brent crude breaking above $100 a barrel for the first time since 2014, when Russia annexed Crimea. Further increases in energy costs could hit pump prices and drive overall inflation higher, economists said, complicating the Fed’s equations.
Raphael Bostic, president of the Atlanta Fed, said on Thursday that while he is closely monitoring events in Ukraine, it is “appropriate” for the Fed to move away from its emergency policy stance.
Mary Daly, president of the San Francisco Fed, and Thomas Barkin of the Richmond Fed, expressed similar views, as did Loretta Mester, president of the Cleveland Fed and a voting member of this year’s Federal Open Market Committee.