Breaking: US annual Core PCE inflation rises to 5.4% in February versus 5.5% expected

• Annual US inflation according to the Core PCE Price Index was a little weaker than expected in February at 5.4%. 
• But with the data viewed as out of date given geopolitical developments late last month, FX markets have not reacted. 

Annual inflation in the US rose to 5.4% in February according to the latest Core PCE Price Index reading released by the US Bureau of Economic Analysis on Thursday. That was a tad below the expected reading of 5.5% YoY, but above January's 5.2% reading. The MoM gain in prices according to the Core PCE Price Index was 0.4%, in line with expectations and a tad lower versus January's 0.5% MoM gain. The Core PCE Price Index is the Fed's favoured measure of underlying US inflationary pressures. 

The headline PCE Price Index rose at a pace of 6.4% YoY and 0.6% MoM in February. The slightly lower than forecast YoY reading in February for the Core PCE Price Index will do little to ease inflation fears. Indeed, given the onset of the Russo-Ukraine war at the end of last month and its subsequent impact on global commodity prices and supply chains, inflation is expected to have surged in March. This is exactly what has been seen in the timelier Eurozone HICP inflation data released this week for March. Given the US' lower economic exposure to the Russo-Ukraine conflict, the surge in prices in the US shouldn't be quite so acute. 

Market Reaction

The idea that the latest PCE Price Index figures are out of date means that markets have not seen any notable reaction to the data. The DXY is broadly unmoved versus pre-data levels just above 98.00.