The U.S. Bureau of Economic Analysis released its Personal Consumption Expenditure (PCE) Index, a key measure of inflation, showing just a fractional a 0.3% increase last month as President Donald Trump begins to tackle the economy.
Since inflation typically rises over time, economists focus not on whether it increased, but on the pace of the increase. The latest figures aligned with expert expectations, according to The Center Square.
The index increased by 2.5% compared to the same time last year, or 2.6% when excluding food and energy costs. While economists had anticipated a steeper decline in inflation by now, the current figures remain significantly lower than the rapid inflation rates experienced during the Biden administration.
“Nothing in these data change the narrative much. Inflation appears to be gently slowing and that could give optimists hope that it will continue to do so,” Harvard economic professor and former advisor to President Barack Obama, Jason Furman wrote on X.. “But core inflation is also stuck above 2.5% — much higher than the 2.1% that forecasters had expected just a year ago.”
Personal income increased by 0.9% in January, while personal spending decreased and personal savings rose.
“This is the ultimate double-edged sword report: PCE came in line with expectations and is relatively good news, but Personal Spending came in much lower than expected and is cause for concern, because of the steep drop in consumption,” Chris Zaccarelli, Chief Investment Officer for Northlight Asset Management in Charlotte, N.C., noted in a statement, per the outlet.
“Given how sanguine investors are about the economy – assuming GDP will stay above 2% for the foreseeable future – and how concerned they are about inflation remaining sticky, we are at risk of an out-of-consensus situation, where we may be experiencing a deteriorating economy with inflation that will be less of an issue than is currently feared,” he noted further.
One of Trump’s biggest selling points on the campaign trail ahead of the November election was taming inflation and reversing the economic decline and malaise during the Biden-Harris administration. But, as Semafor notes, that won’t be easy.
“Some Republican lawmakers and CEOs are fretting over sagging consumer sentiment as Trump’s proposed tariffs and federal layoffs stress a system taxed by persistent inflation and a slowing labor market. Stock markets are subdued, and new data shows that people in the US are feeling less optimistic about the economy, with surging expectations of higher prices and fewer jobs,” the outlet reported on Friday.
“While GOP leaders — and Trump himself — blame former President Joe Biden for rising prices, thanks to his trio of pricey government stimulus laws, there’s a time limit on that argument. Once Trump fully owns the economy, his party will have to answer for the broader economic effects of his policies,” the outlet added.
Trump also has a national debt problem to solve, though that also won’t be easy. “Inflation comes from debt, and so if you add more debt, you’ll get more inflation,” Sen. Rand Paul (R-Ky.) said recently.
Sen. Thom Tillis, R-N.C., facing one of the toughest 2026 reelection races next year, warned in an interview with Semafor that “the tariff regimen has to be right, or it’s going to be inflationary.” He added that it’s critical to manage Trump’s proposed tariffs, along with preventing tax increases; otherwise, it could “end up being a very, very difficult cycle for us.”
Tillis expressed confidence that President Trump’s newly confirmed U.S. Trade Representative, Jamieson Greer, would manage tariffs effectively. Greer faces an immediate test following Trump’s Thursday announcement threatening increased tariffs on Mexico, Canada, and China as early as next week.
Meanwhile, the Trump administration has directed federal agencies to plan for further downsizing after already implementing mass dismissals and buyouts affecting tens of thousands of workers. At the same time, inflation and jobless claims are on the rise, the outlet said.