Inflation surges
Key Questions
What were the latest PCE inflation readings?
May headline PCE came in at 4.1% with core at 3.4%. The trimmed mean PCE ticked up to 2.4%, with a six-month measure at 2.5%.
How might the BEA's PCE methodology change affect inflation data?
The overhaul effective Sept 30 is expected to lower core PCE by about 0.2pp. This could alter perceptions of inflation trends.
What did Warsh say about inflation risks at Sintra?
Warsh acknowledged falling inflation risks, challenging the hawkish narrative. This signaled potential for easing despite recent data.
Why is June CPI expected to fall?
June CPI is projected to decline due to lower gasoline prices. This supports views of an extended Fed pause.
What other inflation indicators showed cooling?
ISM Services Prices Paid cooled to 67.7, and PPI intermediate demand eased. These contrast with the uptick in trimmed mean PCE.
How do conflicting data sets impact Fed policy debate?
Mixed signals from PCE, ISM, and other metrics set up debate ahead of July 14 CPI. They influence expectations around rate decisions.
What is the context for former Fed presidents' comments on core inflation?
Some former officials argue core inflation remains too high, supporting potential further tightening. This adds to the hawkish side of the discussion.
How might Warsh's approach to inflation measurement evolve?
Warsh has signaled interest in changing how the Fed measures inflation. This could lead to shifts in policy communication and targets.
May PCE 4.1% headline, 3.4% core. Trimmed mean PCE ticked up to 2.4% (six-month 2.5%). However, ISM Services Prices Paid cooled to 67.7, and PPI intermediate demand eased. BEA announced PCE methodology overhaul effective Sept 30, expected to lower core PCE by ~0.2pp. June CPI expected to fall on gasoline. Warsh acknowledged falling inflation risks at Sintra, challenging the hawkish inflation narrative. Bullard (former Fed president) argues core inflation too high, September hike likely, and Fed historically does multiple hikes. Conflicting data sets up key debate ahead of CPI July 14.