By Jeffry Bartash
The Fed's preferred gauge, the PCE index, posts an uncomfortable increase for a third month in a row
What's the beef with inflation? It's still too high, five years after the biggest price surge in decades.
The numbers: Shortly before the start of the Iran war, a key measure of U.S. inflation rose at an excessive pace for the third month in a row, underscoring the latest challenge facing the Federal Reserve as it tries to squelch stubborn price pressures.
The personal-consumption price index, the Fed's preferred price gauge, rose by 0.4%, matching the forecast of economists.
A narrower measure of inflation that omits volatile food and energy costs, known as the core PCE, also rose 0.4%.
The rate of inflation in the 12 months that ended in February held steady at 2.8%, the same as in the prior month. Yet only last spring, the PCE inflation rate had sunk to a postpandemic low of 2.3%.
The yearly increase in the core rate of inflation slipped to 3% from 3.1%.
Both of these measures show inflation is still far above the Fed's 2% goal - and is likely to rise even higher in the short run because of a spike in oil prices.
Stubborn inflation will also prevent the Fed from cutting interest rates, at least for the next few months
The Fed views the PCE index as the most accurate barometer of U.S. inflation trends.
Big picture: Persistent inflation is getting worse because of higher prices tied to the Iran war, but the effects might not last long if the conflict is largely resolved soon.
Still, the upturn in inflation has dented the stock market and pushed interest rates higher, both of which could act as drags on the economy through the spring and early summer. The economy lacks other spurs to speed growth.
Looking ahead: &#34;The Fed had an inflation problem even before the Middle East crisis,&#34; said Sonu Varghese, chief macroeconomic strategist at the wealth-advisory firm Carson Group.
Market reaction: The Dow Jones Industrial Average DJIA and S&amp;P 500 SPX were set to decline in Thursday trading amid a tenuous cease-fire with Iran.
-Jeffry Bartash
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(END) Dow Jones Newswires
04-09-26 0920ET

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Inflation in the U.S. is worsening, with the PCE index rising for the third consecutive month, indicating persistent price pressures. The core PCE inflation rate remains above the Fed's 2% target, currently at 3%. The ongoing Iran war is contributing to rising prices, particularly in oil, which may further complicate the Fed's ability to cut interest rates. The stock market is reacting negatively, with declines expected in major indices. Analysts suggest that the Fed faced inflation challenges even before the conflict in the Middle East.

- U.S. inflation, measured by the PCE index, has risen for the third consecutive month, signaling ongoing challenges for the Federal Reserve.  
- The core PCE inflation rate remains elevated at 3%, significantly above the Fed's 2% target, driven by rising oil prices.  
- Market responses indicate anticipated declines in the Dow Jones Industrial Average and S&P 500 due to inflationary pressures exacerbated by the Iran conflict.

Inflation was getting worse before Iran war. PCE price increases show how much.