US PCE Inflation Picked up in February on Solid Consumer Spending
By Reuters | 09 Apr, 2026

The personal consumption expenditure index rose 0.4% after a 0.3% rise in January, and appears likely to have risen further in March.

U.S. inflation increased as expected in February and likely rose further in March amid the war with Iran, a trend that is expected to discourage the Federal Reserve from cutting interest rates for a while.

The personal consumption expenditures price index climbed 0.4% after an unrevised 0.3 gain in January, the Commerce Department's Bureau of Economic Analysis said on Thursday. Economists polled by Reuters had forecast the PCE price index rising 0.4%.

In the 12 months through February, PCE inflation advanced 2.8% after increasing by the same margin in January.

The BEA is still catching up on data releases following delays caused by last year's government shutdown. Inflation was already elevated before the war, largely because of President Donald Trump's import duties.

The U.S.-Israel war with Iran boosted global oil prices and sent the national average gasoline retail price soaring above $4 per gallon for the first time in more than three years.

Economists expect the inflation fallout from the conflict, which started at the end of February, would be more pronounced in March's data. Trump on Tuesday announced a two-week ceasefire on condition of Tehran reopening the blockaded Strait of Hormuz, which has also affected shipments of fertilizers and other goods. The disruptions are expected to raise food prices.

Excluding the volatile food and energy components, the PCE price index increased 0.4% in February, rising by the same margin for a third straight month. In the 12 months through February, so-called core PCE inflation advanced 3.0% following a 3.1% increase in January.

The slowdown in year-on-year core PCE inflation reflected last year's high readings dropping out of the calculation.

The U.S. central bank tracks the PCE price measures for its 2% inflation target. Economists say monthly PCE inflation needs to increase 0.2% for a sustained period to bring inflation back to target. Minutes of the Fed's March 17-18 policy meeting released on Wednesday showed a growing group of Federal Reserve policymakers felt last month that interest rate hikes might be needed to counter inflation.

They also showed "participants noted that a prolonged conflict in the Middle East would likely lead to more persistent increases in energy prices and that these higher input costs would be more likely to pass through to core inflation."

The Fed left its benchmark overnight interest rate in the range of 3.50%-3.75%. The odds of a rate cut this year have greatly diminished.

High prices accounted for some of the rise in spending in February. Consumer spending, which accounts for more than two-thirds of economic activity, rose 0.5% after increasing 0.3% in January. Economists had forecast spending advancing 0.5%.

Expensive gasoline could pull spending away from other categories, though large tax refunds this year could provide lower-income households with some cushion. The war wiped off about $3.2 trillion from the stock market in March, which could force higher-income households to cut back on spending. They have been the main drivers of spending and the overall economy.

(Reporting by Lucia Mutikani; Editing by Chizu Nomiyama)