Fed's Inflation Gauge to Soften Further
WSJ ECONOMICS BLOG
How low will it go? The latest data on consumer prices indicate the Federal Reserve's preferred inflation measure is set to moderate further when the September figure arrives in a couple of weeks.
Based on the latest data on wholesale and consumer prices, several Wall Street analysts expect the increase in the price index for personal consumption expenditures, excluding food and energy, to slow to 1.7% on a year-over-year basis. J.P. Morgan is forecasting a 0.17% core PCE inflation rate for September and 1.7% year-over-year. UBS economists also put it at 1.7%, though their monthly forecast would be the first 0.2% monthly figure (0.157% unrounded) after six straight months of 0.1% gains.
The core consumer price index (excluding food and energy) rose 0.2% in September and was up 2.1% from a year earlier, matching the August year-over-year increase that was the slowest since March 2006, the Labor Department said today. The core producer price index moved just 0.1% higher for the month and was up 2% year-over-year, according to data released last week.
The 12-month change in core PCE, the Fed's favorite gauge, rose 1.8% in August after July's 1.9% year-over-year increase. That's inside the 1% to 2% comfort zone of some Fed officials. The government is scheduled to release the September core PCE data on Nov. 1.
The 12-month core PCE inflation rate hasn't been as low as the latest forecasts are predicting since the 1.65% reading in January 2004, when short-term interest rates were at 1%. (The readings can be revised, of course.) But some Fed officials continue to indicate concerns about price pressures, so that might not be enough for the hawks. As J.P. Morgan economist Haseeb Ahmed delicately said in forecasting the 1.7% core inflation rate, "On balance, the Fed will not be too uncomfortable with recent inflation data." |
