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Federal Reserve System preferred inflation gauge According to new data published

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The Personal Consumption Expenditure Index (PCE) showed that benchmark prices, which exclude more volatile food and energy performance, rose 0.6% month-on-month and rose 4.9% year-on-year, according to the Commerce Department.

These figures exceed the 0.5% monthly growth and 4.7% annual growth projected by economists at Refinitiv, pointing to mounting inflationary pressures across the economy. The indicator also rose by 4.7% compared to the July annual increase.

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The broader figure rose 6.2% year on year after prices rose 0.3% mom compared to a 0.1% decline in July. This increase occurred despite a sharp decline in gas prices.

Fed’s War on Inflation Could Cost $1M in Jobs

While the Fed is targeting the overall PCE in an attempt to bring consumer prices back to 2%, Chair by Jerome Powell Previously told reporters that the underlying data is actually the best indicator of inflation.

“Core inflation is the best predictor of future inflation,” Powell said. “Headline inflation tends to be unsustainable.”


However, both key and key figures indicate that inflation is well above the Fed’s preferred 2% target, which is a worrying sign as the central bank is already raising interest rates at the fastest rate in decades.

Politicians have already approved five consecutive rate hikes, including three consecutive 75 basis point hikes, and there has been no sign of slowing down. At their last meeting last week, Fed officials laid out a trajectory for an aggressive rate hike that would put the federal funds target in restrictive territory by the end of the year.

“Core inflation has accelerated, which is likely to force the Fed to once again aggressively raise the Fed funds rate by 0.75% in November,” said Jeffrey Roach, chief economist at LPL Financial.

Fed officials are considering raising interest rates by a full basis point at their next meeting to try to tame inflation.

Despite hot inflation, the report showed that consumers continued to open their wallets in August, with spending up 0.4% after falling 0.2% a month earlier. However, after-tax income increased just 0.1% after rising 0.5% in the previous month.

Inflation-adjusted spending in 2012 in dollars grew by only 0.1%.

“The US seems ready to make up for positive GDP. [gross domestic product] Growth in the third quarter after two consecutive quarters of negative growth,” Roach said. “But growth cannot last long. A recession looks more likely in early 2023 as the economy eventually breaks under pressure from an aggressive economy. Federal Reserve.”