The Fed’s inflation gauge, the Personal Consumption Expenditure Index (PCE), jumped more than expected, according to the latest data from the Bureau of Economic Analysis (BEA)
- The PCE price index increased 3.6% in April from one year ago.
- The PCE price index, excluding food and energy, increased 3.1% in April from one year ago
While prices were rising, incomes were plummeting. This, however, did not slow down consumption…
- Personal income decreased $3.21 trillion which was a drop of 13.1% from March
- Personal consumption expenditures saw a slight increase of 0.5% to $80.3 billion.
Why this number matters. First off, it is the highest number we have seen since 1992. However, the bigger reason this number is important is a recent Reuters poll. That poll found that PCE would have to hit a high of 2.8% to discomfort U.S. policymakers (Reuters).
The Fed will probably continue to argue that this all transitory and that could be true. However, the inflation gauge jumping above economists’ 2.8% ceiling could pressure them to at least address these concerns.