The CPI affirms that inflation remains sticky. With the PPI showing marked increase, we should see inflation seeping into the economy in the coming weeks.
With the CPI, will the Fed maintain the interest rate or raise it? From the various interviews of the Fed, there seems to be a split of views - some suggesting the raising of rates and some suggesting the rates should remain.
Yet, let's not forget that Fed's preferred inflation indicator is PCE, core PCE to be exact. It needs to be reviewed through the lens of unemployment, inflation and also the broader economy.
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Where would last month's core PCE be if they stopped rate hikes at 2.5%? Valid question I think as yields on long bonds wouldn't be too much lower than they would be today.
M/M core PCE is tracking right into 2% annually. Sometime in the reasonably near future, the Fed is going to start realizing that the second leg of their mandate also needs attention.
Yep. Fed maybe will look at PCE and as long as consumers are cutting back, they determine inflation is contained.