The consumer price index measured by Personal Consumption Expenditures (PCE) rose 2.8% in February 2024, keeping inflation at a high level. Core inflation, which excludes volatile items such as food and energy, reached 3% in the same month, reinforcing the persistence of inflationary pressure.
In the last five years, inflation has remained above the target set by the Federal Reserve (Fed), which is 2%. In the last rolling quarter, the annualized core inflation of the three months reached 3.7%, exceeding the monetary authority’s objectives. Thus, the Fed has faced challenges in controlling price increases.
Core goods inflation rose 0.84% in February, while services inflation showed signs of slowing down. However, the effect of tariff increases still contributes to the rise in goods prices, according to economic sector experts. This combination maintains the scenario of persistent inflation.
Due to these numbers, the Federal Reserve opted to postpone any decision on future interest rate cuts. The minutes of the meeting held in March indicate that rising oil prices may delay the return of inflation to the 2% target in the coming months. Additionally, Fed members pointed to the growing risk that inflation remains above the desired level for a prolonged period.
The report related to February inflation was released late, due to the government shutdown that occurred between October and November 2025. Meanwhile, markets are closely monitoring the Fed’s moves, which still needs to assess the impacts of tariffs and external variables before defining its next strategy.
Context and perspectives of the Federal Reserve amid the inflation and international conflict scenario
The conflict in Iran began shortly after the release of inflation data for February 2024, raising concerns about the influence of this crisis on global energy prices. The president of the Federal Reserve (Fed) of Chicago, Austan Goolsbee, expressed concern about the combined effect of the shock in oil prices and trade tariffs on inflation. She emphasized that, although there are recent signs of improvement, the Fed remains attentive to prevent inflation stemming from tariffs from spreading to the services sector.
Energy costs continue under pressure due to tensions in the Middle East, contributing to the increase in underlying inflation, which excludes food and energy and is closely monitored by the US central bank. Moreover, the expectation of a potential prolonged war in the region generates concern about the persistent impact on input costs, which could deepen inflationary resilience in the coming months. On the other hand, this conjuncture limits the Fed’s room to maneuver to make interest rate cuts, even amid the economic scenario.
The consumer price index measured by Personal Consumption Expenditures (PCE), the Fed’s preferred indicator to guide its monetary policy decisions, has shown consistent increases in the past three months. This persistent behavior in core inflation represents a challenge for the entity, as it prolongs the need to maintain a more rigid policy stance to try to contain price rises. Therefore, the data release reinforces an environment of resistant inflation, which requires caution in defining the Fed’s next actions.
