NEW YORK, March 13 (Reuters) - The U.S. Commerce Department said on Friday its Personal Consumption Expenditures Price Index (PCE) rose largely in line with expectations in January, the latest sign that inflation remained relatively well behaved ahead of the war with Iran that began last month.
Friday's PCE Index rose 0.3% from December, compared with the 0.3% estimate of economists polled by Reuters and the prior 0.4% rise in December. Stripping out the volatile food and energy components, the so-called
core PCE Price Index increased 0.4% last month, in line with expectations.
In the 12 months through January, PCE inflation increased 2.8%, compared with expectations for a 2.9% rise. The core PCE Price Index increased 3.1% last month. That was in line with estimates and followed a revised 3% rise in the core inflation in December. The Federal Reserve tracks the PCE price measures for its 2% inflation target.
Meanwhile, the Commerce Department's second estimate showed gross domestic product (GDP) increased by 0.7% in the fourth quarter, compared with 1.4% growth expected by economists polled by Reuters.
MARKET REACTION:
STOCKS: U.S. stocks rose following the data's release, with futures tracking the Dow Jones Industrial Average, S&P 500 xxx and Nasdaq Composite rising 0.4%.
BONDS: U.S. Treasury yields slipped. The 10-year yield was last down 2 basis points at 4.25%. The two-year yield, which is sensitive to expectations for Fed policy, was down 6 basis points to 3.70%.
FOREX: The dollar index rose 0.3% to 100.32.
COMMENTS:
PETER CARDILLO, CHIEF MARKET ECONOMIST, SPARTAN CAPITAL SECURITIES, NEW YORK:
“We have a mixed bag of macro news here. Of course, the downward revision of GDP was much more than expected and that's not good news, along with the fact that consumer spending was revised downward.
"The good news is that the inflation data measured by the PCE basically in line with expectations. ... Inflation remains elevated, sticky and with the possibility of energy prices eventually moving into the pipeline, the Fed is likely to stay on hold for a longer period of time.”
TIM GHRISKEY, SENIOR PORTFOLIO STRATEGIST, INGALLS & SNYDER, NEW YORK:
"Most of today's economic numbers were generally in line with expectations with the exception of durable goods orders, which was weak and the GDP estimate which was also weak. There's some concern about the economy from these numbers. These are numbers worth looking at and they question the strength of the U.S. economy. War issues in the Middle East are the most important determinant of financial markets at the moment."
(Reporting by Stephen Culp, Sinead Carew; editing by Colin Barr)
