Key Fed inflation measure rose 2.8% in March from a year ago, more than expected

Inflation showed little signs of letting up in March, with a key barometer the Federal Reserve watches closely showing that price pressures remain elevated.

The personal consumption expenditures price index excluding food and energy increased 2.8% from a year ago in March, the same as in February, the Commerce Department reported Friday. That was above the 2.7% estimate from the Dow Jones consensus.

Including food and energy, the all-items PCE price gauge increased 2.7%, compared to the 2.6% estimate.

On a monthly basis, both measures increased 0.3%, as expected and equaling the increase from February.

Markets showed little reaction to the data, with Wall Street poised to open higher. Treasury yields fell, with the benchmark 10-year note at 4.67%, down about 0.4 percentage point on the session.

Consumers showed they are still spending despite the elevated price level. Personal spending rose 0.8% on the month, a touch higher even than the 0.7% estimate. Personal income increased 0.5%, in line with expectations and higher than the 0.3% increase in February.

The report follows bad inflation news from Thursday and likely locks the Fed into holding the line on interest rates likely through at least the summer unless there is some substantial change in the data. The Commerce Department reported that PCE in the first quarter accelerated at a 3.4% annualized rate.

With inflation still percolating two years after it began its initial ascent into the highest level in more than 40 years, central bank policymakers are watching the data even more intently as they contemplate the next moves for monetary policy.

The Fed targets 2% inflation, a level that core PCE has been above for the past three years.

The Fed watches the PCE in particular because it adjusts for changes in consumer behavior and places less weight on housing costs than the more widely circulated consumer price index from the Labor Department.

While they watch both headline and core measures, Fed officials believe the ex-food and energy figure provides a better look at longer-run trends as those two categories tend to be more volatile.

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