Fed's Inflation Gauge Accelerates, Showing Persistent Price Growth

The central bank's preferred measure of inflation rose last month, indicating ongoing price pressures.

Published on Feb. 28, 2026

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The Federal Reserve's preferred inflation gauge, the personal consumption expenditures (PCE) price index, accelerated in January, signaling that price growth remains elevated despite the central bank's efforts to cool the economy through interest rate hikes.

Why it matters

The PCE index is the Fed's primary inflation metric, and its continued rise suggests the central bank may need to maintain its aggressive monetary policy stance to bring inflation back down to its 2% target. Persistently high inflation erodes consumer purchasing power and can lead to further interest rate increases, which could slow economic growth.

The details

The PCE price index rose 0.6% in January from the prior month, the Commerce Department reported. That was up from a 0.2% increase in December. Compared to a year earlier, the PCE index was up 5.4%, accelerating from a 5.3% annual rate in December.

  • The PCE price index data was released on February 20, 2026.

The players

Federal Reserve

The central banking system of the United States that sets monetary policy, including interest rates, to promote economic growth and stability.

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What they’re saying

“The Fed will likely need to keep interest rates higher for longer to bring inflation down to its 2% target.”

— Economist

What’s next

The Federal Reserve will review the latest inflation data at its next policy meeting in March, where it is expected to decide whether to raise interest rates further.

The takeaway

The persistent rise in the Fed's preferred inflation gauge suggests the central bank may need to maintain its aggressive monetary policy stance to bring price growth back under control, even if that risks slowing the economy further.