Don’t Be Fooled by Conflicting Inflation Metrics. The Fed Won’t.
The US central bank outsmarted itself last year by overparsing the numbers from PCE and CPI. It won’t repeat that mistake.
Food prices are just one component of inflation indexes.
Photographer: Justin Sullivan/Getty Images
Rarely have market prognosticators disagreed by such a broad margin on the path forward for inflation and the Federal Reserve’s efforts to fight it. That’s in part because the government’s two main price gauges leave a lot of open ground for the interpretation of the facts.
The underlying signal from the personal consumption expenditures price index — the so-called trimmed-mean version — suggests that it has been converging on more normal levels; the consumer price index, on the other hand, remains unusually high. It’s a mistake to focus entirely on one indicator over the other, and the Fed isn’t likely to stop raising interest rates until it sees strong evidence that both are clearly coming down.