The Federal Reserve’s favorite gauge of inflation, the Personal Consumer Expenditure (PCE) price index, continued to climb in June, according to data released Friday by the Bureau of Economic Analysis (BEA).
The PCE index rose 6.8% for the year ending June, an increase from the 6.3% it was in April and May, the BEA announcement. The PCE is the Fed’s favorite inflation measure because it’s “just better at capturing the inflation that people actually face in their lives,” and the central bank is working to keep it at 2%, a said Federal Reserve Chairman Jerome Powell. said Wednesday.
The PCE price index excluding food and energy rose 4.8% from a year ago, from 4.7% in May.
Another measure of inflation, the Consumer Price Index (CPI), was released on July 13 and showed year-on-year inflation of 9.1% in June. Although the PCE is the measure the Fed follows most closely, it is released a few weeks after the CPI each month, which is more widely followed by the general public. (RELATED: Are We In A Recession? It Doesn’t Matter To Suffering Americans, Economists Say)
Like the CPI report, the PCE data released on Friday suggests that inflation was higher in June than at any time in decades.
New PCE highs for June pic.twitter.com/Kauk5Li6iH
—Sven Henrich (@NorthmanTrader) July 29, 2022
The CPI places greater weight on gasoline and residential rent prices because of the way its equation is calculated, both of which have skyrocketed in recent months, according Axios.
Typically, the gap between the two measures is much narrower, averaging just 0.2% over the past decade, and widening the gap could add volatility and confusion on market, Axios added.
The report comes after the Federal Reserve announced it would raise interest rates by 0.75% on Wednesday to fight inflation, and after the Bureau of Economic Analysis announced on Thursday that gross domestic product ( US GDP) had shrunk for the second straight quarter, the conventional definition of a recession.
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