US Fed's preferred inflation indicator rises in January, higher than expectations

By Ovunc Kutlu

ISTANBUL (AA) – The US Federal Reserve's preferred inflation indicator increased in January both annually and monthly, coming higher than market expectations, according to the Commerce Department figures released Friday.

The core personal consumption expenditures (PCE) price index rose 4.7% annually in January, up from a 4.6% year-on-year gain in December, and coming higher than the market estimate of a 4.3% increase.

On a monthly basis, the index rose 0.6% in January, up from a 0.4% monthly gain in December, and higher than the market estimate of a 0.4% increase.

"The $312.5 billion increase in current-dollar PCE in January reflected increases of $162.2 billion in spending for goods and $150.2 billion in spending for services," the Commerce Department said in a statement.

On a monthly basis, food prices increased 0.4% and energy prices rose 2%, while annually food prices soared 11.1% and energy prices jumped 9.6%, according to the figures.

The PCE price index, which includes food and energy prices, rose 5.4% annually in January, also accelerating from a 5.3% year-on-year gain in December, and coming much higher than the market expectation of a 5% increase.

On a monthly basis, the index rose 0.6% in January, pacing up from a 0.2% month-on-month gain in December, and also coming higher than the market expectation of a 0.5% increase.

The accelerating figures indicate that the Fed is most likely to continue its monetary tightening cycle in interest rate hikes for at least the first half of this year.

The US central bank made a total of 425-point rate hikes on seven occasions last year to fight record-high inflation that climbed to its highest level in over 40 years by mid-2022.

The Fed made a 25 basis points of a rate hike on Feb. 1, and its next two-day meeting will conclude on March 22, when its economic projections will also be released.