WASHINGTON: US prices increased less than expected in February, with the cost of services outside housing and energy slowing significantly, keeping a June interest rate cut from the Federal Reserve on the table.

The report from the Commerce Department on Friday also showed consumer spending rising by the most in just over a year last month, underscoring the economy’s resilience. The United States continues to outperform its global peers despite higher borrowing costs, thanks to persistent labor market strength.

“Core services inflation is slowing and will likely continue throughout the year,” said Jeffrey Roach, chief economist at LPL Financial in Charlotte, North Carolina. “By the time the Fed meets in June, the data should be convincing enough for them to commence its rate normalization process.”

The personal consumption expenditures (PCE) price index rose 0.3% last month, the Commerce Department’s Bureau of Economic Analysis said. Data for January was revised higher to show the PCE price index climbing 0.4% instead of 0.3% as previously reported. Goods prices rose 0.5% last month, boosted by a 3.4% jump in the cost of gasoline and other energy products.

There were also strong increases in the prices of recreational goods and vehicles as well as clothing and footwear. But prices for furnishings and household equipment, and other long-lasting manufactured goods were subdued.

In the 12 months through February, PCE inflation advanced 2.5% after increasing 2.4% in January.

Economists polled by Reuters had forecast the PCE price index gaining 0.4% on the month. Though price pressures are subsiding, the pace has slowed from the first half of last year.

Fed officials last week left the US central bank’s policy rate unchanged in the current 5.25%-5.50% range, having raised it by 525 basis points since March 2022.

Policymakers anticipate three rate cuts this year. Financial markets expect the first rate reduction in June.