American consumers have already drastically cut their spending, bracing for even tighter budgets. The latest consumer spending indicator fell to the lowest level in the past four years. The Personal Consumption Expenditures (PCE) price index, a key inflation gauge in the US, went down in January, suggesting a potential cooling of inflation. However, the strict tariffs threatened by President Donald Trump’s administration put this progress at risk.
According to the US Department of Commerce, Americans cut their spending by 0.2% in January 2025 from a month ago. This decline was the largest since February 2021, raising concerns among experts, as consumers are becoming more cautious amid widespread uncertainty about economic prospects.
The Commerce Department reported on February 28 that the Personal Consumption Expenditures (PCE) price index slowed to 2.5% year-over-year. The index stood at 2.6% in December of last year. Meanwhile, the core PCE index matched analysts' expectations at 2.6%, down from a 2.8% increase a month earlier. Nevertheless, the indicator remains at its lowest level since June 2024.
Following the report, the US dollar traded almost unchanged. Its index gained 0.01%, reaching 107.31. Earlier last week, the instrument had retreated to its lowest level of 2025, plunging to 106.13.
Against this backdrop, traders and investors dealing in futures contracts tied to Federal Reserve interest rate expectations anticipate another rate cut in June. Looking ahead, market participants still expect a second rate cut in September.
