February PCE Inflation Forecasts Show Price Pressures Remaining Stubbornly High 

Key Takeaways

• Inflation has fallen from its 2022 peak but has yet to reach the Fed’s 2% target.
• The February PCE report is expected to show inflation remaining steady at 2.5% year over year.
• Economists expect core inflation (which excludes food and fuel prices) may rise to 2.7% year over year, up from 2.6% in January.

Forecasts for the February Personal Consumption Expenditures Price Index show inflation staying above the Federal Reserve’s target, even as the inflationary impact of President Donald Trump’s trade wars have yet to be felt.

Economists expect PCE inflation to read at 0.3% in February, the same as in January, according to consensus estimates from FactSet. Year over year, the number is expected to be 2.5%—also the same as in January.

Core PCE inflation (which excludes food and fuel prices) is predicted to have risen 0.3% month over month (the same as in January) and 2.7% for the year (up from 2.6% in January).

After falling substantially from its 2022 highs, inflation has been slow on the proverbial last mile to the Fed’s 2% target. “The trend in inflation is holding at around 2.5%,” says Bill Adams, chief economist for Comerica Bank.

February PCE Report Highlights

• PCE report release date and time: Friday, March 28, at 8:30 a.m. EDT
• The PCE Price Index is forecast to rise by 0.3% in February, the same as in January.
• Core PCE is forecast to rise 0.3% in February after rising the same amount in January.
• Year over year, the PCE Price Index is forecast to 2.5% in February after rising the same amount in January.
• Core PCE year over year is forecast to rise 2.7% in February after rising 2.6% in January.

Services Inflation Rising for Now

Morningstar senior US economist Preston Caldwell observes that services inflation rose significantly in January—especially discretionary spending, such as travel and entertainment prices. He expects this to continue in February, with the three-month increase of core services prices rising to its highest level since March 2024.

Caldwell says continued strength in consumer spending in the second half of 2024 made businesses more willing to raise prices. He cautions that this may be subject to change, as weakening consumer spending numbers may put a damper on price hikes.

Adams has a different view, with Comerica predicting that PCE will rise 0.2% in February, with core PCE rising 0.1%. “I think February should provide a little bit of relief,” he says. “Some of the hotter inflation in January was due to one-off effects.”

Adams flagged consumer sentiment as a potential worry, saying the likelihood of a recession in the next 12 months is elevated at 1 in 3, compared with the 1 in 5 average for the past couple decades. He adds that the unclear trajectory for the Trump administration’s fiscal and trade policies has elevated uncertainty about the economy.

When Will the Fed Cut Rates?

Futures markets predict the Fed will continue to hold interest rates steady at its upcoming meeting, after doing the same at its first two meetings of the year. Analysts predict that the June meeting is the first with a more than 50% chance of a cut, while Adams doesn’t expect one until July. This is a marked contrast from the end of 2024, when markets predicted a more than 60% chance of at least one cut by May.