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The Fed’s go-to inflation gauge heated up again
CNN
—
The Federal Reserve’s preferred inflation gauge moved even higher in December, driven in part by rising food and energy prices. However, a closely watched measurement of underlying inflation trends indicated some progress in the fight to rein in price hikes.
The Personal Consumption Expenditures price index rose 2.6% in December from the year before, heating up from November’s 2.4% increase, according to new Commerce Department data released Friday.
That acceleration was in line with expectations, which called for a 2.6% annual increase, according to FactSet estimates.
On a monthly basis, prices rose 0.3% as compared to 0.1% in November.
Inflation has cooled substantially since peaking in the summer of 2022, and that progress continued through 2024 to the point where an elusive “soft landing”— price stability without having the economy tank into a recession — remained achievable as Joe Biden wrapped up his presidency.
This story is developing and will be updated.
The Federal Reserve’s preferred measure of inflation, the personal consumption expenditures (PCE) index, rose 0.4% in July, marking the fourth consecutive month of accelerating price growth. This increase brings the year-over-year rise in the PCE index to 4.2%, well above the Fed’s target of 2%.
The surge in inflation is being driven by a combination of factors, including supply chain disruptions, strong consumer demand, and rising energy prices. The Fed has attributed much of the recent inflationary pressures to temporary factors, such as the reopening of the economy and the ongoing effects of the pandemic.
Despite the Fed’s assurances that inflation is transitory, policymakers are closely monitoring the situation and are prepared to take action if necessary. Many economists expect the central bank to begin tapering its bond purchases later this year, with a potential interest rate hike in 2022.
The latest uptick in inflation is likely to add fuel to the debate over how long the Fed can afford to remain accommodative in its monetary policy stance. With prices continuing to rise, the pressure is mounting on the central bank to address the inflationary pressures before they become entrenched in the economy.
Tags:
- Federal Reserve
- Inflation
- Economic indicators
- Consumer prices
- Monetary policy
- Interest rates
- Economic data
- Federal Reserve Board
- Consumer spending
- Central bank
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