Karen Nye

🔥The PCE index, which the Federal Reserve targets, rose 0.4% in Feb, up a tick from the 0.3% pace in Jan. That translates to 2.8% y/y, which is same as Feb. Measured of momentum accelerated. The 3 & 6-month annualized pace moved up, to 4.1% & 3.4 from 3.5% & 3.2% in Jan. Core PCE, which stips out food & energy, advanced 0.4% and cooled a bit on a y/y basis. That provide little solace to the Fed as the 3- & 6-mo annualized gains accelerated as well. Core goods prices jumped at their fastest pace since Jan 2022, as the pandemic-induced inflation gripped the economy. The jump in recreational goods - gaming and software mostly. Information goods jumped at their fastest monthly gain since December 1971. There is more in the pipeline. Import prices of computers surged in Feb. Those prices are recorded prior to tariffs, although many tech behemoths got waivers on computers and computer chips to compete better in the AI arms race. Service sector inflation cooled a bit but remains elevated and is still running more than a percent ahead of the pandemic. This is tough for the Fed. The minutes to the March meeting revealed that debate over whether the next move will be up instead of down intensified. Brace for a signal for that optionality following the Fed’s next meeting in April.