There is debate among reasonable people about whether US disinflation is stalling and the implications for Federal Reserve monetary policy. However, it is becoming increasingly difficult to ignore the underlying strength of the economy, suggesting that central bankers can afford to hold off on reducing benchmark interest rates. Recent data released by the Bureau of Economic Analysis on Friday revealed that personal spending increased by 0.4% in February, surpassing economists’ expectations of a 0.1% rise after adjusting for inflation. Additionally, consumer sentiment reached its highest level since July 2021, weekly initial jobless claims decreased, and pending home sales rebounded in February following a decline in January.
In an economy that has consistently exceeded expectations and is continuously scrutinized for weaknesses, the most recent data presents little cause for concern. The resilience of personal spending, positive consumer sentiment, and improvements in the job market and housing sector all point to continued economic strength. This data suggests that the Federal Reserve may have the luxury of waiting before implementing any further interest rate adjustments.