Summary
The Federal Reserve’s favorite inflation indicator, the PCE Price Index, will be released by the BEA this morning. The index differs from the better-known consumer price index because its composition is changed more often and therefore reflects real-time price fluctuations more quickly. In the most recent report, through October, PCE inflation was 2.3% year-over-year (by comparison, in the last CPI report, through November, inflation was 2.7%). Core PCE, which smooths out volatile food and energy prices, rose 2.8% last month. Our PCE forecasts call for 2.5% for the headline figure and 2.9% for the core figures, as persistent inflation in certain services remains a challenge. Overall, inflation in this cycle peaked in the summer of 2022 and has been on a fairly consistent downward trend since then. We monitor twenty inflation measures every month. On average, they indicate that prices are rising 2.4% year over year, compared to 2.3% a month ago. We note that the numbers are volatile and somewhat distorted by fluctuations in the Producer Price Inflation report. Focusing on core inflation — which we get by averaging the Core CPI, market-based PCE Ex-Food &
