Catenaa, Friday, February 28, 2025- US cost of living rose 2.5% in January over the last 12 months, official data said on Friday, showing a different trend from the Consumer Price Index(CPI), which rose unexpectedly in January.
Personal Consumption Expenditures(PCE), as measured by the Bureau of Economic Analysis, rose by 2.5% in January year on year, marking the first time in four months the inflation measure decreased after 2.6% in December.
Economists had expected the PCE price index to climb 0.3% in January.
The decelerating PCE inflation provided some evidence that inflation is on a trajectory down to the Fed’s goal of a 2% annual rate, where it tended to hover in pre-pandemic years.
The report marked a rare instance where the government’s two major measures of inflation showed opposite trends for the same month as the Bureau of Labor Statistics’ CPI rose unexpectedly fast to 3% in January.
Alo, the “Core” PCE inflation, which excludes volatile prices for food and energy, fell to a 2.6% increase over the year, down from 2.8% in December, hitting its lowest since June.
Economists and policymakers prefer core measures when assessing inflation because food and gas prices can fluctuate for reasons that have little to do with longer-term inflation trends.
Many forecasters expect inflation to gradually decrease over the rest of the year, providing some relief for household budgets that have been squeezed by years of larger-than-usual price increases for everyday expenses.
However, President Donald Trump’s proposed tariffs against foreign trading partners, set to kick in next week, are a major wildcard, and could push prices up on a wide range of items.
