The Personal Consumption Expenditures (PCE) price index, the Federal Reserve’s preferred gauge of inflation, rose 2.8% year-over-year in February, unchanged from January and matching economist forecasts. The Bureau of Economic Analysis (BEA) reported that gains were driven primarily by goods, with notable increases in clothing, footwear and energy prices. On a monthly basis, the PCE index advanced 0.4%, also in line with expectations and flat compared with the prior month.
Sticky Core PCE Lingers as War Shakes Oil Prices
10 April 2026 - 19:00 CEST
Core PCE, which strips out volatile food and energy components, climbed 3.0% annually, down slightly from 3.1% in January and aligning with consensus estimates. Monthly core PCE also rose 0.4%, unchanged from January.
War impact excluded from data
The US-Israel strikes on Iran began on 28 Feb, meaning the February PCE release does not capture any effects from the conflict in the Middle East. Oil prices have since spiked, raising concerns about pass-through effects on broader inflation in coming months.
Fed officials flag rising risks
Minutes from the Federal Reserve’s March interest-rate meeting, released earlier this week, showed policymakers closely debating the potential consequences of the Middle East war. The vast majority of participants noted that progress toward the Fed’s 2% inflation target could prove slower than previously anticipated, with the risk of inflation remaining persistently above target having increased.
Committee members observed that short-term inflation expectations had risen in recent weeks, largely tied to higher oil prices following the outbreak of conflict, while longer-term expectations stayed broadly consistent with the 2% objective. Most participants stressed it remained too early to assess the full economic impact, and judged it prudent to monitor developments closely before adjusting the stance of monetary policy.
Q4 GDP revised lower
The BEA also released its third and final estimate for fourth-quarter 2025 GDP, showing the US economy expanded at an annual rate of 0.5%. That figure came in below the previous estimate of 0.7% and marked a sharp slowdown from 4.4% growth in the third quarter. The downward revision of 0.2 percentage point stemmed mainly from weaker investment, particularly private inventories.
For the full year 2025, real GDP grew 2.1%, down from 2.8% in 2024. Consumer spending and investment remained the primary drivers of growth.
Muted market reaction
Markets showed limited movement following the data releases. S&P 500 futures fell 0.3% to 6,806 on the day. Bitcoin declined 0.2% to around $71,140 roughly 10 minutes after the numbers crossed the wires. The EUR/USD exchange rate remained essentially unchanged at 1.172.
This combination of sticky inflation readings and fresh geopolitical uncertainty adds complexity to the Federal Reserve’s policy path. With near-term price pressures potentially amplified by energy costs from the ongoing conflict, investors will watch upcoming releases – including March PCE and CPI – for clearer signals on whether the central bank can ease policy or may need to remain restrictive longer than anticipated.
