Two recent readings on inflation showed price increases decelerated in February — but within the details, economists see warning signs.
Thursday's report from the Bureau of Labor Statistics showed that its "core" Producer Price Index (PPI) — which tracks the price changes companies see and excludes food and energy — rose 3.4% from the year prior, down from the 3.6% seen in January. Meanwhile, the Bureau of Labor Statistics' Consumer Price Index (CPI) showed core prices rose 3.1% in February, the lowest yearly increase in core CPI since April 2021.
But the components from CPI and PPI that pass through to the Fed's preferred inflation measure, the core Personal Consumption Expenditures (PCE) index, indicate the closely followed inflation metric didn't fall in February.
Bank of America economists and several other Wall Street research teams now estimate that "core" PCE, which excludes food and energy, will show prices increased 2.7% in February, up from the 2.6% increase seen in January.
"This would indicate progress on inflation continues to stall and reinforces our call for the Fed to remain on hold," Bank of America US economist Stephen Juneau wrote in a note to clients.
