Latest US inflation data aligns with expectations: Fed Chair Powell

Jerome Powell on inflation: Federal Reserve Chair Jerome Powell stated on Friday that the most recent US inflation data falls within the anticipated range, suggesting that the central bank's outlook for potential interest rate adjustments remains unchanged. 

Powell remarked that the February figures for the personal consumption expenditures (PCE) price index were in line with expectations, indicating a level of inflation that the Fed finds acceptable. 

Despite the data showing a lesser slowdown compared to last year, Powell stressed that the Fed would not react excessively.

The February PCE price index, released by the US Commerce Department, revealed a 2.5 per cent annual increase, slightly higher than the previous month. 

Powell acknowledged that core inflation, excluding volatile food and energy prices, rose slightly faster than anticipated, but stressed that it remains within acceptable parameters.

While some economists noted improvements in certain aspects of inflation deemed crucial the Fed, Powell reiterated that the central bank's baseline outlook remains intact. 

With the economy exhibiting strength, Powell stressed upon a  cautious approach to potential rate cuts, underscoring the importance of further evidence indicating sustained progress in inflation reduction.

Powell is scheduled to deliver prepared remarks at Stanford University next week, where he is expected to provide additional insights into the Fed's monetary policy outlook. 

Economists anticipate a nuanced message from Powell, reaffirming the Fed's data-dependent approach and its requirement for substantial evidence of inflation trajectory towards the 2 per cent target.

Despite expectations of rate cuts later in the year, Powell said that there is a need for additional progress in inflation reduction before implementing such measures. 

He stressed the importance of the decision to adjust rates and underscored the Fed's commitment to careful deliberation, given the current strength of the economy and labour market.

(With Reuters Inputs)