Broadening inflation keeps pressure on the Fed

Personal Consumption Expenditure (PCE) inflation surpassed economists’ expectations in the latest report as it jumped to a 40-year high of 6.8%.  While the acceleration in prices was driven in part by rising energy prices, the report showed broad-based price increases in most other items as well…

The Median PCE Inflation is a valuable tool for gauging overall inflation pressures because it is not skewed by large or volatile components. As shown by the graph below, this measure exploded higher by 1.9% last month – by far the largest monthly increase in its 45-year history.  This is evidence that inflation pressures have become more entrenched in many respects, even as commodity prices are cooling off. Ultimately, the resiliency of the inflation data places more pressure on the Federal Reserve to remain on a tightening course.

Eli Petropoulos, CFA – Sr. Market Analyst