Federal Reserve Chair Jerome Powell remarked on Friday that the latest U.S. inflation figures align with the desired trajectory. He emphasized that these numbers, specifically the personal consumption expenditures (PCE) price index data for February, met expectations without prompting an overreaction from the central bank. Powell, speaking at the San Francisco Fed, stated that although the figures didn’t match the robust readings from the latter half of the previous year, they were closer to the desired outcome.
Powell’s remarks echo his previous statements after the Fed’s recent policy meeting, where he asserted that despite the higher-than-expected inflation in January and February, the overall trend still pointed towards a decrease in price rises.
According to the U.S. Commerce Department, the PCE price index rose by 2.5% annually in February, slightly higher than the previous month. However, the core PCE figure, excluding volatile food and energy prices, rose by 0.3% on a month-to-month basis, indicating a slightly faster pace than anticipated by Powell.
Lou Crandall, chief economist at Wrightson ICAP, noted that while the core PCE figure was marginally below expectations, it still remained above the central bank’s 2% annualized target.
Despite these nuances, Powell maintained that the current economic strength did not necessitate immediate rate cuts. He emphasized the importance of a cautious approach, especially given the ongoing stability in the economy and the labor market.
Looking ahead, Powell is expected to deliver further insights on the monetary policy outlook in his upcoming public appearance at Stanford University. Economists anticipate a nuanced message, emphasizing the Fed’s data-dependency and the need for additional evidence regarding inflation trends.
While policymakers await the forthcoming inflation and jobs reports for March, Powell reiterated the significance of observing sustained progress in inflation before considering rate adjustments.
In conclusion, Powell’s remarks reflect a cautious stance, emphasizing the need for prudence amidst evolving economic indicators.