By Howard Schneider and Ann Saphir
WASHINGTON (Reuters) -The latest U.S. inflation data is “along the lines of what we would like to see,” Federal Reserve Chair Jerome Powell said on Friday in comments that appeared to keep the central bank’s baseline for interest rate cuts this year intact.
The personal consumption expenditures (PCE) price index data released on Friday “is what we were expecting,” Powell said, and even though the numbers showed less of a slowdown than last year, “you won’t see us overreacting.”
The data last month were “not as low as most of the good readings we got in the second half of last year, but it’s definitely more along the lines of what we want to see,” Powell said during an appearance at the San Francisco Fed where he was interviewed by Kai Ryssdal of public radio’s “Marketplace” program.
Powell’s comments were in line with his remarks after the Fed’s policy meeting last week, in which he said higher-than-expected inflation in January and February had not changed the sense that price rises would keep falling this year to the central bank’s 2% target.
Government data showed the PCE price index increased at a 2.5% annual rate in February, up from 2.4% in the prior month. The number excluding volatile food and energy prices rose 0.3% on a month-to-month basis, slightly faster than Powell anticipated when he said last week that February core inflation would be “well below” 0.3%.
Still, Powell indicated the February report did not undermine the Fed’s baseline outlook.
Some details of the PCE data, economists noted, showed improvement in aspects of inflation that the Fed considers important, even as the headline numbers have shown little progress in the first two months of the year.
The central bank last week held its benchmark overnight interest rate steady in the 5.25%-5.50% range and also reaffirmed – narrowly – a baseline projection that the rate will fall by 0.75 percentage points by the end of this year.
Powell in recent weeks has had to reconcile expectations for rate cuts to begin this year with data showing improvement in the inflation number had slowed to start the year.
“We need to see more” progress on inflation before cutting rates, he said on Friday. “The decision to begin to reduce rates is a very, very important one … The economy is strong right now, and the labor market is strong right now. And inflation has been coming down. We can and we will be careful about this decision because we can be.”
(Reporting by Howard Schneider; Editing by Dan Burns, Chizu Nomiyama and Paul Simao)
https://finance.yahoo.com/news/powell-views-policy-inflation-remains-135103359.html
