Fed’s Preferred Inflation Gauge Rose 5.4%, Highest Since 1983


Thursday, the Commerce Department said that the Federal Reserve’s preferred inflation indicator indicated increased price pressures in February, rising to its highest annual level since 1983.

The personal consumption expenditures price index jumped 5.4 percent from the same period in 2021, the largest increase since April 1983, when food and energy prices were excluded.

The headline PCE index, which includes petrol and food, increased by 6.4 percent, the quickest rate since January 1982. The core PCE gain was slower than the Dow Jones prediction of 5.5 percent. The index rose 0.4 percent every month, in line with expectations.

Due to rising costs, consumer expenditure climbed only 0.2 percent for the month, well below the 0.5 percent projection. The growth in disposable personal income was 0.4 percent, somewhat less than the 0.5 percent forecast, while real disposable income declined 0.2 percent. Savings increased to $1.15 trillion, or a 6.3 percent increase.

In other economic news, the Labor Department reported that initial unemployment claims for the week ending March 26 totaled 202,000. That was a 14,000 rise over the previous week and well ahead of the 195,000 predictions, although it was still below the level seen before the Covid epidemic.

Continuing claims, which are calculated a week after the headline figure and include those who claimed for a second week, fell to slightly over 1.3 million, the lowest level since December 27, 1969.

While the labor market has tightened, inflation has become the focus of much concern as price rises continue. The Fed has tightened policy in response to fast-rising inflation, with a rate hike in March projected to be followed by hikes at each of the remaining six meetings this year.

Supply chain bottlenecks, which have plagued the economy for much of the epidemic era, pushed up goods prices by 1.1 percent for the month, the fastest increase since October 2021. Those issues were believed to be “transitory,” a term the Fed had to relinquish when it finally gave in to the world’s loosest monetary policy.

However, the price hikes shifted from long-term purchases to short-term purchases in February. Durable goods prices remained unchanged, while nondurable goods prices increased by 1.8 percent.

Inflation in the services sector was kept to a minimum, gaining 0.3 percent. On the other hand, energy prices increased by 3.7 percent before leveling down in March, while food inflation increased by 1.4 percent.

In February, the Fed’s favored inflation gauge increased by 5.4 percent. An earlier version of the headline misstated the month. The personal consumption expenditures price index grew 5.4 percent from the same period in 2021, excluding food and energy expenses. The year was incorrectly given. For the month, food inflation increased by 1.4 percent.

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