The Personal Consumption Expenditures Price Index for February has been released by the Bureau of Economic Analysis. The bad news for the market is that the US core PCE prices have increased more than expected in February. US stocks will remain under pressure as sticky inflation will deter the US Fed from cutting rates in a hurry.
The US Fed is expected to cut rates twice in 2025 while President Trump favours rates to be lowered aggressively. However, the US Fed chief Powell will not be in a hurry to lower rates since tariff-related uncertainty is still high and could cause inflation to reignite.
The US Personal Consumption Expenditures (PCE) price index increased by 0.3% month-over-month in February 2025, maintaining the same pace as the previous two months, and in line with expectations. The Personal Consumption Expenditures Price Index (PCE) is the Federal Reserve’s preferred price index.
Excluding food and energy, the PCE price index increased 0.4 percent. The core PCE price index in the US, which excludes volatile food and energy prices, rose by 0.4% from the previous month in February 2025, surpassing the forecast of 0.3% and up from 0.3% in January. Annually, the core PCE inflation rate picked up to 2.8%, above market expectations of 2.7%.
From the same month one year ago, the PCE price index for February increased 2.5 percent. Excluding food and energy, the PCE price index increased 2.8 percent from one year ago. Prices for goods rose 0.2%, below 0.5% in January and prices for services increased 0.4%, above 0.2% in the previous month.
Personal income increased $194.7 billion (0.8 percent at a monthly rate) in February, according to estimates released today by the U.S. Bureau of Economic Analysis. Disposable personal income (DPI)—personal income less personal current taxes—increased $191.6 billion (0.9 percent) and personal consumption expenditures (PCE) increased $87.8 billion (0.4 percent).
Personal outlays—the sum of PCE, personal interest payments, and personal current transfer payments—increased $118.4 billion in February. Personal saving was $1.02 trillion in February and the personal saving rate—personal saving as a percentage of disposable personal income—was 4.6 percent.
The increase in current-dollar personal income in February primarily reflected increases in personal current transfer receipts and compensation.
The $87.8 billion increase in current-dollar PCE in February reflected increases of $56.3 billion in spending for goods and $31.5 billion in spending for services.
PCE is a measure of the prices that people living in the United States, or those buying on their behalf, pay for goods and services. The PCE price index is known for capturing inflation (or deflation) across a wide range of consumer expenses and reflecting changes in consumer behavior.