Monday, October 25, 2021

Fed’s favorite inflation gauge shows prices consistently skyward vault in August

Inflation turned red hot in August, according to the Commerce Department, with the headline personal consumption expenditure (PCE) index rising 4.3 percent during the year to a level not seen since 1991.

Meanwhile, the core PCE inflation index, which excludes the volatile categories of food and energy and is the Federal Reserve’s preferred inflation gauge, rose 3.6 percent in August, the Commerce Department announced on October 1. August’s 3.6 per cent annual core PCE growth matches the June and July figures, the highest in 30 years.

That inflation rate is well above the Fed’s 2 percent target, putting pressure on policymakers as they consider rolling back some of the stimulus measures that helped lift the economy out of the pandemic but now face rising prices. appear out fast.

Federal Reserve Chairman Jerome Powell spoke on Wednesday of “tension” between inflation, which is and well above target, and ongoing labor market sluggishness, balancing the dual mandates of price stability and maximum employment. The Fed’s policy challenge to His comments also raised fears of a recession – a state of slowing economic growth and rapidly rising prices that plagued the US economy in the 1970s.

Some economists have warned that rising energy prices are causing major damage to struggling supply chains, raising the risk of stagflation. Others have expressed concern that supply-side crises combined with more generally easing fiscal and monetary policies and high debt ratios could lead to a full-blown inflationary crisis.

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While Fed officials have taken a more cautious stance on inflation in recent statements, they say it is a temporary phenomenon that will end once supply chain dislocations ease.

New York Federal Reserve Bank President John Williams recently said that consumer expectations for inflation five years down the road “barely budge” and they remain “anchored well” around the Fed’s 2 percent objective. Huh. He added, however, that there is upside risk and “a great deal of uncertainty” around the inflation outlook.

The monthly core PCE gauge, which measures changes in the index month-to-month, held steady at 0.3 percent in August, which matches the July rate, but up from 0.5 percent in June and 0.6 percent in May, according to the Commerce Department. is down. This suggests that extreme inflationary pressure may have passed.

Powell told lawmakers on Thursday that he expected some respite from high inflation in the coming months.


Tom Ozimek has an extensive background in journalism, deposit insurance, marketing and communications, and adult education. The best writing advice he’s heard from Roy Peter Clark: ‘Hit your goal’ and ‘Leave the best for last.’


This News Originally From – The Epoch Times

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