Fed inflation metric cools while spending rebounds

The Federal Reserve’s preferred gauge of underlying inflation cooled last month while household spending rebounded.

The so-called core personal consumption expenditures price index, which strips out the volatile food and energy components, increased

0.3% from the prior month, data out Friday showed. That followed a 0.5% reading in January, marking the biggest backto-back gain in a year.

Fed officials may nonetheless take comfort in a tame increase in a narrower gauge of services inflation within the report. At the same time, inflationadjusted consumer spending exceeded all estimates on the heels of the biggest gain in wages in over a year, according to the report from the Bureau of Economic Analysis.

The cooler inflation reading is a welcome reprieve after other measures showed price pressures intensified at the start of the year. Even so, Fed officials are looking for more evidence that inflation is sustainably on a downward trend, and in the meantime, they’re not rushing to cut interest rates.

Chair Jerome Powell said the figures were “pretty much in line with our expectations” and reiterated the central bank doesn’t need to rush to cut interest rates. Policymakers will have access to one more PCE report, in addition to others on consumer and producer prices as well as employment, before their next meeting starts on

April 30.

U.S. stock and bond markets are closed in observance of Good Friday.

Officials pay close attention to services inflation excluding housing and energy, which tends to be more sticky. That metric stepped down to 0.2% from a month ago after a 0.7% surge in January, according to the BEA.