Inflation stayed stubbornly high heading into the Iran war, Fed’s preferred gauge shows

By Alicia Wallace, CNN

(CNN) — Americans kept spending in February even as prices rose, with the Iran war expected to push costs higher, new data showed Thursday.

Consumer spending rose 0.5% in February, up from a 0.3% increase in January, according to a shutdown-delayed report released Thursday by the Commerce Department.

However, when taking elevated inflation into account, spending rose just 0.1% from January.

Thursday’s report also showed that inflation remained stubbornly higher than typical: The Personal Consumption Expenditures price index – the inflation gauge the Federal Reserve uses for its 2% target rate – climbed 0.4% from January, which held the annual rate at 2.8%.

Excluding food and energy prices, which tend to be quite volatile, the core PCE price index also rose 0.4%, bringing the annual rate to 3%.

Economists were expecting overall prices to have increased by 0.3% from January, leaving the annual rate of inflation at 2.8%, according to FactSet.

When excluding energy and food, they estimated that the core PCE price index rose 0.4% for the month but that the annual rate would edge down to 3% from the initially reported 3.1% – partly because of comparisons to a period last year when inflation was high.

This story is developing and will be updated.

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