Core PCE +0.1% In January and +1.6% YOY, In Fed Comfort Zone. Savings +5%, A 15yr High.

Overall Personal Consumption Expenditures, the Fed’s favorite measure of consumer inflation, were +0.2% in January and +0.7% year-over-year through January. Excluding volatile oil and food costs from the readings, “Core” PCE price index for January was +0.1% and +1.6% YOY through January.

The overall number showed a steep -2.2% fall in 4Q2008 (-0.6% Oct, -1.1% Nov, -0.5% Dec) reflecting not only dropping oil prices but also a deflationary threat. The Fed looks closely at Core PCE excluding food and energy prices because of the price volatility of these items, and the Fed’s zone for reasonable inflation is 1-2% per year. At +1.6%, the Core number is right in line within their comfort zone.

Other noteworthy items from today’s report was the fact that households are hoarding cash with the Personal Savings Rate rising 5% annualized. This is a 15-year high.