Fed's Dilemma Far From Over? Survey Shows Its Favorite Inflation Gauge Expected To Stay Higher

The Federal Reserve's preferred measure of underlying price pressures, the Personal Consumption Expenditures price index, is expected to have stayed higher in February according to a survey.

According to a Bloomberg survey, PCE price index is estimated to have risen 0.4% in February from a month earlier, which would be its largest rise since June. The PCE price index reflects changes in the prices of goods and services purchased by consumers in the United States.

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Compared with February 2022, the core inflation gauge is expected up 4.7%, while the overall measure is projected to post a 5.1% advance. Both the estimates are more than double the Fed's goal, the report pointed out. The data is scheduled to be released Thursday.

The Dilemma: If it turns out to be true, the central bank would find itself in a dilemma as it tries to rein in inflation when the banking crisis has still not abated. Despite expectations from certain corners of Wall Street, the central bank refrained from hitting the pause button in its March policy and raised the policy rate by 25 basis points.

It is noteworthy that in a summary of economic projections published last week, Federal Reserve officials revised PCE inflation forecast for the year to 3.3% from 3.1% estimated in December. Core PCE inflation forecast now stands at 3.6% against 3.5% forecast earlier.

Fed Comments: Market participants will also be watching out for remarks by Fed officials this week including Fed Governor Philip Jefferson, Boston Fed President Susan Collins, Richmond Fed President Tom Barkin, and governors Christopher Waller and Lisa Cook.

Fed Vice Chair for Supervision Michael Barr is set to testify at separate hearings of the Senate Banking Committee and the House Financial Services Committee on recent bank failures, the report said.

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