What the Fed’s Favorite Inflation Indicator Means
What Happened?
The Fed’s preferred inflation indicator, the core personal consumption expenditures price index (PCE), rose 0.2% in July, as expected. This is a significant increase from the 0.1% gain seen in June. The year-over-year core PCE inflation rate also rose to 4.6%, up from 4.3% in June.
What Does This Mean?
The Fed has been closely watching inflation data as it considers raising interest rates. A sustained increase in inflation could force the Fed to raise rates sooner than expected. This could have a negative impact on the economy, slowing growth and potentially leading to job losses.
What’s Next?
The Fed is likely to continue to monitor inflation data closely in the coming months. If inflation continues to rise, the Fed may be forced to raise interest rates sooner than expected.
Additional Information:
- The core PCE inflation rate excludes food and energy prices, which can be volatile. This makes it a more reliable indicator of underlying inflation trends.
- The Fed’s target inflation rate is 2%.
- Inflation has been rising in recent months due to a number of factors, including supply chain disruptions, rising energy prices, and increased consumer demand.
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