Underlying Inflation Declines Despite Strong Consumer Spending

The February PCE inflation report shows the inflation problem is largely behind us, according to key trend measures.

Apr. 9, 2026 at 9:08pm

Got story updates? Submit your updates here. ›

A vibrant abstract illustration composed of intersecting triangles and rectangles in shades of blue, red, and yellow, conceptually representing the cooling of inflation pressures in the US economy.Declining underlying inflation trends signal the end of the price surge, even as consumer spending remains strong.Cleveland Today

The latest personal consumption expenditures (PCE) price index report showed a 0.4% increase in February, but a deeper look reveals that underlying inflation measures like the Dallas Fed's 16% trimmed mean and the Cleveland Fed's median PCE actually declined, signaling that the inflation problem is largely behind us despite strong consumer spending during the month.

Why it matters

The report provides an optimistic outlook on the state of inflation in the US economy, suggesting that the Federal Reserve may not need to continue aggressive interest rate hikes if the underlying trend measures continue to improve. This could have significant implications for the direction of monetary policy and the trajectory of the economy.

The details

While the headline PCE index rose 0.4% in February, driven by increases in goods prices, the measures designed to capture the underlying trend in inflation actually improved. The Dallas Fed's 16% trimmed mean, which strips out the biggest movers on both ends of the price distribution, fell to a one-month annualized rate of 1.82% from 2.71% in January. The Cleveland Fed's median PCE, which isolates the single price change at the midpoint of the distribution, also fell on a year-over-year and six-month annualized basis. This suggests the February acceleration in headline and core PCE was driven by outliers, not a broad-based pickup in price pressures.

  • The February PCE inflation report was released on April 9, 2026.

The players

Bureau of Economic Analysis

The federal agency responsible for producing economic data, including the personal consumption expenditures price index.

Federal Reserve

The central banking system of the United States, which is responsible for monetary policy and maintaining price stability.

Dallas Fed

The Federal Reserve Bank of Dallas, which produces the 16% trimmed mean measure of underlying inflation.

Cleveland Fed

The Federal Reserve Bank of Cleveland, which produces the median PCE measure of underlying inflation.

Got photos? Submit your photos here. ›

The takeaway

This report suggests that the Federal Reserve may not need to continue aggressive interest rate hikes if the underlying trend measures of inflation continue to improve, potentially signaling a shift in the central bank's approach to monetary policy and a more positive outlook for the overall economy.