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Core PCE up 0.3%, less than expected

An inflation gauge that the Federal Reserve closely follows rose slightly less than expected in February, raising hopes that interest rate hikes are helping to dampen price increases.

The price index for personal consumption expenditures excluding food and energy rose 0.3% for the month, the Commerce Department reported Friday. That was below the Dow Jones estimate of 0.4% and lower than January’s 0.5% increase.

Year-over-year, core PCE rose 4.6%, a slight deceleration from January’s level.

Including food and energy, the overall PCE rose 0.3% per month and 5% per year, compared to 0.6% and 5.3% in January.

In other data from the report, personal income rose 0.3%, slightly above the 0.2% estimate. Consumer spending rose 0.2%, compared to the estimate of 0.3%.

Stock futures held higher after the report.

Market prices on Friday morning after the inflation report indicated a slight bias in favor of the Fed raising its benchmark rate another quarter of a percentage point in May.

The Fed’s own unofficial projections released last week indicated perhaps one more increase this year and no reduction. However, traders expect cuts this year, with end-of-year prices for the federal funds rate at 4.25%-4.5%, half a point below the current target range. .

While inflation eased in some regions, it remained pernicious in others. Housing costs, in particular, have risen sharply. Fed officials, however, are reviewing this increase and expect rents to slow throughout the year.

Still, inflation is expected to remain well above the Fed’s 2% target through 2024, and officials said they remain focused on lowering prices despite the current banking turmoil.

Data released on Thursday suggests that the problems in the banking sector could also be at least under control. Borrowing through two Fed emergency lending programs fell slightly last week, indicating there hasn’t been a runaway influx of liquidity for banks that may be undercapitalized.

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