The Fed’s preferred inflation measure once again recorded a high monthly increase and this brings the latest indication that the U.S. central bank needs to reduce the simple monetary policy that has been in place since the outbreak of the Covid-19 pandemic.
The personal consumption expenditure (PCE) price index rose 0.5% in January in line with the increase in December based on a Commerce Department report on Friday.
This led to an annual increase of 5.2%, the fastest rate in nearly 4 decades and up from the 4.9 percent increase recorded in December.
Excluding items such as food and energy, PCE has jumped 6.1% over last year or 0.6% month -on -month. Fed officials are closely monitoring current inflation data to assess how quickly to raise interest rates this year from near -zero levels today.
Personal income was unchanged during the month, and rising price pressures were accompanied by a 2.1 percent increase in household spending at the beginning of the year. The data was released following reports of conflicts between Russia and Ukraine in which drafters were observing potential impacts on the economy.
The US central bank is still expected to continue its first interest rate hike at its next meeting in the middle of next month despite the recent turmoil, and investors are still expecting 0.25 points.
So far several officials have spoken in recent days about the potential risks to economic growth and the inflation prospects stemming from growing geopolitical tensions. However, this does not seem to deter policymakers to raise interest rates.
