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Inflation was pretty tame in February—or was it? A report on inflation scheduled for Friday could throw some cold water on the idea that consumer price increases are significantly decelerating.

A report on Personal Consumption Expenditures by the Bureau of Economic Analysis is expected to show the cost of living rose 2.5% over the last 12 months, the same annual rate as in January, according to a survey of economists by Dow Jones Newswires and The Wall Street Journal . The forecast calls for "core" inflation, which excludes volatile prices for food and energy, to have risen 2.7% over the year in February, up from 2.6% in January.

If the forecasts are on target, the PCE inflation measure would tell a different story than the Consumer Price Index, a different official inflation figure. That measure showed price increases decelerated faster than expected in February, fueling optimism that the post-pandemic bubble of high inflation is slowly but surely deflating.

Core PCE inflation is especially significant because, more so than the CPI, it's the benchmark that officials at the Federal Reserve use to gauge whether inflation is running at the central bank's target of a 2% annual rate. The Fed has held its key fed funds rate at an unusually high level for years—pushing up borrowing costs on all kinds of loans in an effort to slow down the economy and push down inflation.

Cooler inflation would allow the Fed to cut interest rates, helping borrowers of auto loans, credit cards, and business loans. Fed officials cut rates late last year but have held off on further cuts partly due to concerns that President Donald Trump's campaign of raising tariffs could reignite high inflation .

The CPI and PCE indexes measure inflation differently, use different formulas to calculate it, and give different statistical weights to important prices such as housing and airline tickets. The two measures tend to move in tandem, but can at times diverge from one another, muddying the picture about the trajectory of inflation.

Read the original article on Investopedia