The slowdown was driven by weaker price gains in shelter, used cars, and medical care commodities, while transportation services costs fell 0.8%.
Markets react, focus shifts to Fed’s next moveThe US Dollar Index (DXY) retreated from session highs following the data, while US stock futures turned positive, suggesting optimism over potential rate cuts later this year.
However, economists remain divided on the Federal Reserve’s path ahead. Goldman Sachs now expects core PCE inflation—a key Fed metric—to rise to 3% by December, up from 2.65% in January, due to Trump’s recent tariff hikes.
According to Reuters, “The longer that inflation runs above the Fed’s target, even if it is due to temporary forces like tariffs, the greater the chance that expectations de-anchor to the upside,” said Stephen Juneau, US economist at Bank of America Securities.With the next FOMC meeting scheduled for March 18-19, all eyes will be on Fed Chair Jerome Powell’s remarks, as markets gauge whether the central bank will hold rates steady or signal future cuts amid economic uncertainty.
‘Fed likely to cut rates 2-3 times in 2025’
The US Federal Reserve is still expected to deliver two to three rate cuts this year, despite ongoing market fluctuations, according to Marc Franklin, Deputy Head of Multi Asset Solutions-Asia at Manulife Investments.
Also read: US Fed likely to cut rates two to three times this year, says Manulife’s Marc Franklin
While investor sentiment has been volatile, Franklin maintains that “two to three cuts by the Fed this year is a reasonable base case.”
The US stock market has faced a sharp sell-off amid rising policy uncertainty. Franklin noted that investors initially took long positions in equities at the start of the year, but as risk perception shifted, outflows accelerated.
Although fears of an economic slowdown persist, Franklin does not expect an immediate recession. Instead, he believes the US economy is transitioning from government-driven growth to private sector-led expansion.
