Fed’s Inflation Focus Needs a Tuneup
Past errors by the central bank compel it to put less emphasis on consumer prices and more on financial stability.
St. Louis Fed President James Bullard questions the need for higher rates.
Photographer: Akio Kon/Bloomberg
What now? Continued Federal Reserve interest-rate increases for as far as the eye can see? Those are the primary questions with the last inflation target standing essentially hitting the central bank’s 2 percent bullseye.
The core personal-consumption-expenditures price index (PCE), a broad measure of inflation that excludes food and energy, rose 1.98 percent in July from a year earlier. The core PCE has long been the gentlest measure of inflation, so for many economists the evidence that it’s catching up to every other similar metric, such as the widely recognized consumer price index, that have long since pierced 2 percent is akin to the end of a vigil. (The government is expected to say Thursday that the consumer price index rose 2.4 percent in August from a year earlier when excluding food and energy.)