By Nathalie Voit

A key inflation indicator rose to its highest level in nearly 40 years in February, the Commerce Department said in a news release published on March 31.

The core personal consumption expenditures price index, which discounts gas and grocery prices, increased 5.4% from one year ago. This was its largest annual jump since April 1983, according to the department.

Including food and energy, headline PCE surged 6.4% year-over-year, its fastest increase since January 1982.

Energy prices climbed 25.7% in the twelve months ending in February, while food prices accelerated 8.0%.

Dow Jones analysts had expected a 5.5% increase in the gauge, putting core PCE slightly below economist estimates.

Month-over-month, the Fed’s preferred measure of inflation rose 0.4% from January. Headline PCE surged a steep 0.6%.

Consumer spending for the month increased by just 0.2% as Americans continued to be squeezed by higher inflation. Forecasts had projected a 0.5% increase in personal consumption expenditures, so Thursday’s measure was a testament to the economic impacts of inflation.

Disposable personal income increased by $76.1 billion, or 0.4%, in February. However, real disposable personal income fell by 0.2% as record-high prices eroded consumers’ purchasing power.

Personal savings rose to $1.15 trillion in February as the savings rate settled at 6.3%, the Commerce Department said.

Thursday’s report places additional pressure on the Federal Reserve, which raised its benchmark interest rate by 25 basis points in mid-March to try and halt the current inflationary spiral.