According to the latest data released by the Bureau of Economic Analysis in the United States, inflation in the country is slowing down as expected.
On Friday, February 28th, the Bureau of Economic Analysis in the United States released a report showing that the annual inflation rate of the Personal Consumption Expenditures (PCE) price index decreased from 2.6% in December to 2.5% in January, indicating further easing of inflation pressures.
The core PCE price index, which is the preferred inflation gauge for the Federal Reserve (excluding food and energy prices), increased by 2.6% year-on-year in January, slightly lower than the 2.9% in December, in line with market expectations.
On a monthly basis, both the overall PCE price index and the core PCE price index rose by 0.3% in January, consistent with analysts’ predictions. The report also indicates that personal income increased by 0.9% that month, while personal spending decreased by 0.2%, suggesting that consumers are becoming more cautious in their expenditures.
Despite the ongoing slowdown in inflation data, the impact of this PCE data release on the US Dollar (USD) appears to be limited. As of the time of reporting, the US Dollar Index only rose slightly by 0.02% to 107.27.
After a 25-basis-point interest rate cut by the Federal Reserve in December, lowering the policy rate to a range of 4.25% to 4.50%, the Fed decided to keep rates unchanged in January. The minutes from the meeting released on February 19th indicated that the Federal Reserve believes the pace of price increases is “still on the high side,” citing this as the reason for pausing further easing policies.
Market analysts point out that since the likelihood of a rate cut by the Fed in March is almost zero, investors are more focused on the potential impact of President Trump’s policy changes on the economy rather than just the inflation data.