-- US inflation accelerated sequentially in February as real consumer spending edged higher, with analysts expecting price pressures to intensify due to the spillover effects of the Middle East conflict.
The personal consumption expenditure price index rose 0.4% month over month in February following a 0.3% gain in the prior month, the Bureau of Economic Analysis reported Thursday. On a yearly basis, the PCE price index held steady at 2.8% growth.
The Federal Reserve's preferred inflation metric, which excludes food and energy, climbed 0.4% month over month, unchanged from January. Annual growth slowed to 3% from 3.1%. All inflation prints met estimates in Bloomberg-compiled surveys.
"Core prices are actually gaining momentum, up 4.4% annualized the past three months, compared with 3.4% in the past six months," Sal Guatieri, senior economist at BMO Capital Markets, said in a report. "And this is before spillover pressures from the Iran war."
The US and Iran have agreed to a two-week ceasefire, apparently pausing hostilities that spread across the Middle East and boosted energy prices. Officials from Washington and Tehran are set to meet in Pakistan this weekend amid reports of ceasefire violations.
"Headline inflation is expected to jump on higher (gasoline) prices in March, however, it's likely too soon for the second order price effects to show up in core inflation," Ksenia Bushmeneva, economist at TD Economics, said in a report.
Inflation-adjusted real consumer spending rose 0.1% in February, slower than the Street's estimate of a 0.2% gain and following a flat reading in January.
"With headline inflation likely to test 4% soon, there is little chance the Fed will ease policy in the near term," Guatieri said.
Markets widely expect the central bank to keep its benchmark lending rate unchanged later this month, the CME FedWatch tool showed.
The US central bank should be "nimble" in adjusting monetary policy in light of heightened risks to inflation and employment driven by the Middle East conflict, minutes from the central bank's March 17-18 meeting showed Wednesday.