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The lowball core PCE measure of inflation rose by 3.62% compared to a year ago, the hottest inflation reading since May 1991 while the PCE price index with food and energy included jumped by 0.4% for the month (4.8% annualized), and by 4.3% from a year ago. This is the hottest PCE inflation reading since January 1991.
For its measurement of its inflation target – the “symmetrical” 2% – the Fed uses the “core PCE” inflation measure because it is the lowest lowball inflation measure the government publishes, and it understates actual inflation even more than other indices. “Core PCE” excludes food and energy, which can be volatile but make up a big part of what people on the lower half of the income scale spend their money on.
The month-to-month increase of 0.331% was roughly the same red-hot as the month-to-month increase as in July (0.338%), according to the Bureau of Economic Analysis today. This works out to be an annualized pace of 3.9% (12 x 0.331%), which is higher than the current 12-month core PCE of 3.62%.
The PCE price index with food and energy included jumped by 0.4% for the month (4.8% annualized), and by 4.3% from a year ago. This is the hottest PCE inflation reading since January 1991:
…In the spring, the Fed brushed off the hot inflation readings with the meme that there were just “transitory” and would be gone by the end of the year. Now the story has changed. Now the Fed is getting comfortable with saying that “transitory” is going to last into mid or late 2022. Transitory is the new Spandex.
Editor’s Note: The original post by Wolf Richter has been edited ([ ]) and abridged (…) above for the sake of clarity and brevity to ensure a fast and easy read. The author’s views and conclusions are unaltered and no personal comments have been included to maintain the integrity of the original article. Furthermore, the views, conclusions and any recommendations offered in this article are not to be construed as an endorsement of such by the editor. Also note that this complete paragraph must be included in any re-posting to avoid copyright infringement.
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