US Fed’s favored inflation gauge ticks lower in January

US Fed’s favored inflation gauge ticks lower in January

WASHINGTON  — The US central bank’s favored measure of inflation edged lower on an annual basis last month, according to government data published Thursday, providing some good news to Federal Reserve policymakers in their battle against high inflation.

The personal consumption expenditures (PCE) price index rose at an annual rate of 2.4 percent in January, down 0.2 percentage points from December, the Department of Commerce said in a statement.

The decrease is likely to be well-received at the Fed, which has recently poured cold water on the prospects of early rate cuts as it looks to bring inflation down to its long-run target of two percent.

Fed officials have been debating the right time to start lowering rates, which currently stand at a 23-year high of between 5.25 and 5.5 percent.

READ: Fed signals ‘patience’ on rate cuts as data disappoints

A number of officials have come out in recent weeks to suggest that the Fed can afford to be patient before it begins cutting rates, given the underlying strength of the US economy.

Below market expectations

On a monthly level, headline PCE inflation rose by 0.3 percent in January, slightly below market expectations, according to Briefing.com.

READ: US consumer spending fuels strong Q4 2023 GDP growth

The closely watched “core inflation” measure, which strips out volatile food and energy costs, also eased, rising by 2.8 percent on an annual basis.

However, core PCE increased by 0.4 percent from a month earlier, indicating an uptick in underlying inflation from December to January.

This is likely to keep up the pressure on the Fed to ensure that any fall in inflation is more widespread before it starts reducing interest rates.

There was also sharp increase in personal income, which jumped by 1.0 percent in January after increasing by just

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