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Is US Inflation on the Way Out or Here to Stay?
Since March 2021, inflation has been above the Federal Reserve’s 2% target. After peaking in June 2022, inflation—measured as the 12-month change in the personal consumption expenditures (PCE) price index—trended steadily downward for a year. This decline reversed in July and August 2023, though some other measures of inflation continued to fall. Regardless of how we measure it, inflation remains high. Do these developments signal the end of high inflation is nigh, or will inflation instead settle at rates higher than in the period prior to the COVID-19 pandemic? In this blog post, I will provide relevant ... (full story)
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Before our discussion, I will take a few minutes to discuss recent economic data and the outlook for monetary policy. Recent Economic Data Incoming data over recent months show ongoing progress toward both of our dual mandate goals—maximum employment and stable prices. Inflation By the time the Federal Open Market Committee (FOMC) raised rates in March 2022, it was clear that restoring price stability would require both the unwinding of pandemic-related distortions to supply and demand, and also restrictive monetary policy to cool strong demand and give supply time to catch up. These forces are now working together to bring inflation down. After peaking at 7.1 percent in June 2022, 12-month headline PCE (personal consumption expenditure) inflation is estimated at 3.5 percent through September.1 Core PCE inflation, which omits the volatile food and energy components, provides a better indicator of where inflation is heading. Twelve-month core PCE inflation peaked at 5.6 percent in February 2022 and is estimated at 3.7 percent through September. Inflation readings turned lower over the summer, a very favorable development. The September inflation data continued the downward trend but were somewhat less encouraging. Shorter-term measures of core inflation over the most recent three and six months are now running below 3 percent. But these shorter-term measures are often volatile. In any case, inflation is still too high, and a few months of good data are only the beginning of what it will take to build confidence that inflation is moving down sustainably toward our goal. We cannot yet know how long these lower readings will persist, or where inflation will settle over coming quarters. While the path is likely to be bumpy and take some time, my colleagues and I are united in our commitment to bringing inflati post: <=USD>:*POWELL: FOMC `PROCEEDING CAREFULLY' GIVEN RISKS, HIKES SO FAR ?*POWELL:`ADDITIONAL EVIDENCE' OF STRONG ECONOMY MAY MERIT HIKING post: POWELL: GEOPOLITICAL TENSIONS `HIGHLY ELEVATED,' POSE KEY RISKS post: POWELL: THERE MAY STILL BE MEANINGFUL TIGHTENING IN THE PIPELINE post: Fed's Powell: The Fed's role is to monitor highly elevated geopolitical tensions that pose important risks to global economic activity -The extent of additional policy firming and how long to keep policy restrictive will depend on data, outlook, balance of risks
The Federal Reserve System is the central bank of the United States. It performs five general functions to promote the effective operation of the U.S. economy and, more generally, ...
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- Posted: Oct 19, 2023 10:56am
- Submitted by:Category: Fundamental AnalysisComments: 0 / Views: 3,041