COTW: Sticky Inflation Measures

April 4, 2023COTW: Sticky Inflation Measures

  • Last week, several important inflation measures were released. The Personal Consumption Expenditure (PCE) Price Index moved down to 5.0% in February, from 5.3% in January. However, since its peak of 7.0% in June 2022, there has been only a very slow downward trend over the last 9 months. It remains well above its 20-year average and the Fed’s target of 2.0%.
  • Another more focused inflation gauge—supercore inflation, or core services excluding shelter—increased to 4.6% year-over-year. Supercore inflation excludes housing costs, and focuses on the price of services such as medical care, education, and recreational services. It is now at the same level as where it was 11 months ago, and it has remained largely unchanged since December.
  • While there are signs that inflation may (very) slowly be starting to inch in the right direction, key inflation measures such as PCE remain well above the Fed’s target. Despite the recent instability in the U.S. banking system, the Fed has reiterated its commitment to bringing inflation back under control, and these sticky inflation measures are increasing the probability of another rate hike at the next FOMC meeting.


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