By Matt Grossman

Two major indicators this week both showed inflation running a little hotter than expected last month. But there may still be some good news for the Federal Reserve.

Economists now think its preferred inflation gauge-the PCE, or personal-consumption-expenditures price index-probably came a bit closer to target last month.

PCE draws on data from both of the readings we got this week, the consumer and producer-price indexes.

Crunching the numbers, analysts now think core PCE, which excludes volatile food and energy, likely rose by 0.2% or 0.3% in January. That's partly because although producer prices rose 0.4% last month, the categories that matter for PCE were much more muted.

In turn, that would probably slow annual core PCE inflation to about 2.5% or 2.6%-better than December's 2.8% rate and closer to the Fed's 2% target.

Still, Fed officials have said they are in no rush to resume cutting interest rates, after holding steady in January. The PCE data is due Feb. 28.

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(END) Dow Jones Newswires

February 13, 2025 10:03 ET (15:03 GMT)

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