Key Fed inflation measure rose 0.6% in January, more than expected (cnbc.com)
Just checking in how our 'transitory' inflation is going? I thought Modern Monetary Theory was going to save us all. I guess we should spend more, since we've been assured that it has no bearing on inflation.Quote:
A measure the Federal Reserve watches closely to gauge inflation rose more than expected in January, indicating the central bank has more work to do to bring down prices.
The personal consumption expenditures price index excluding food and energy increased 0.6% for the month, and was up 4.7% from a year ago, the Commerce Department reported Friday. Wall Street had been expecting respective readings of 0.5% and 4.4%.
Including the volatile food and energy components, headline inflation increased 0.6% and 5.4% respectively.
Markets fell following the report, with futures tied to the Dow Jones Industrial Average off more than 300 points.
Consumer spending also rose more than expected as prices increased, jumping 1.8% for the month vs. the estimate for 1.4%. Personal income increased 1.4%, higher than the 1.2% estimate. The personal saving rate also was up, rising to 4.7%.
All of the numbers suggest inflation accelerated to start the new year, putting the Fed in a position where it likely will continue to raise interest rates. The central bank has pushed benchmark rates up by 4.5 percentage points since March 2022 as inflation hit its highest level in some 41 years.
The Fed follows the PCE measures more closely than it does some of the other inflation metrics because the index adjusts for consumer spending habits, such as substituting lower-priced goods for more expensive ones. That provides a more accurate view of the cost of living.
Policymakers tend to focus more on core inflation as they believe it provides a better long-run view of inflation, though the Fed officially tracks headline PCE.