Fed's Core-Inflation Gauge Seen Rounding Up to 2% Goal in March

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(Bloomberg) -- The Federal Reserve’s preferred gauge of underlying U.S. inflation is about to hit policy makers’ target for the first time in almost six years -- if you’re feeling generous.

The personal consumption expenditures price index, excluding food and energy, probably rose 2 percent last month from a year earlier, according to economists at Goldman Sachs Group Inc. and Morgan Stanley. Well, almost 2 percent: Analysts at both firms are projecting a 1.96 percent reading, ahead of data due April 30.

Economists made the projections for the Commerce Department gauge after reviewing figures from the Labor Department’s separate consumer-price index, released Wednesday. While the Fed officially targets headline PCE prices, which include all items, officials often cite the core index as a more reliable indicator of inflation trends. The last time the core PCE annual figure registered above 2 percent was April 2012, at 2.03 percent.

No rounding up will probably be needed with the headline PCE gauge: Goldman and Morgan Stanley see it rising 2.1 percent in March from a year earlier, while JPMorgan Chase & Co. is projecting 2.04 percent.

Even if March core PCE inflation comes in at 1.9 percent -- or 1.91 percent -- as projected by Michael Feroli at JPMorgan, “both the core and headline PCE numbers will be effectively at the Fed’s 2 percent inflation goal,” keeping the Fed on track to continue raising interest rates gradually with an increase in June, Feroli said in a research note.

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