Federal Reserve CPE inflation

Preferred Inflation Measure of Federal Reserve, PCE Higher in July

The Personal Consumption Expenditures (PCE) Index, the preferred inflation measure of the Federal Reserve, saw a slight increase in July, reversing some of the steep declines seen in June, as the central bank strives to return inflation to its target of 2%. The “core” PCE, excluding food and energy expenses, rose 4.2% year-on-year, in accordance with economist predictions. The year-over-year PCE inflation rate increased to 3.3%, higher than the 3% rate observed in the preceding month.


The increase in Personal Consumption Expenditures (PCE) can be attributed to the success of the “Barbenheimer” theatrical double header, in addition to the Taylor Swift and Beyonce concert tours. Despite the apparent strength of real demand, Paul Ashworth, an economist from Oxford Economics, noted that inflationary pressures remain subdued.


At the Jackson Hole Economic Symposium held last week, Federal Reserve Chair Jerome Powell declared that the CPE, being the inflation measure favored by the Federal Reserve, is still too high in comparison to their targeted goal of 2%, and that they are prepared to implement further rate increases if deemed necessary in order to reach their desired objective. This inflation measurement is highly pertinent to the Gross Domestic Product (GDP).


In July of the current calendar year, the annualized rate of core PCE inflation was 2.8%, the lowest such rate seen in two and a half years. In the opinion of economist Michael Ashworth, the Federal Reserve’s goal of 2% inflation shall be attainable by mid-2024. Investors are currently paying close attention to the August jobs report, as it is anticipated that 168,000 additional jobs have been added to the United States economy, and the unemployment rate remains at 3.5%.


As the Federal Reserve continues to move forward, the most up-to-date data will be of paramount importance in informing their decision-making process. The preferred inflation measure of the Federal Reserve, PCE, had an increase in July, counteracting some of the significant decreases from the preceding month. Despite the Fed’s 2% inflation objective still remaining marginally out of reach, Paul Ashworth from Oxford Economics is of the belief that it will be achievable by mid-2024. With the August jobs report still pending, investors will be carefully monitoring the Federal Reserve’s next moves.


Source: Yahoo Finance

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