The lead chart shows CPI inflation cooled from 9.1 percent to 4.0 percent. Core CPI inflation, excluding food and energy only decline modestly, from 6.6 percent to 5.3 percent. The Fed’s preferred measure if inflation, PCE, declined only from 5.4 percent to 4.7 percent.
The Fed says it will get PCE inflation down to 2.0 percent. When? How?
Powell’s Post-FOMC Press Conference Statements
Powell: “The risks of overdoing it and underdoing it are getting closer in balance. I still think, and my colleagues agree that the risks to inflation are to the upside. We don’t think we are there. We would like to see credible evidence that inflation is topping out and beginning to come down.”
Chris Rugaber AP: Why signal additional rate hikes? Why not give it more time? It’s surprising to see so much hawkishness in the dots.
Powell: “We are two and a half years into this. Forecasters, including Fed forecasters, have consistently thought inflation was about to turn down, and have been wrong. If you look at core PCE inflation, overall, over the last 6 months, you’re not seeing a lot of progress. It’s running at a level over four-and-a-half percent, far above our target.”
Fed Pencils in Two More Interest Rate Hikes in 2023
Powell: Rent disinflation is “coming slower than we would have expected.”
Not in this corner.
Rent may easily determine what happens to core inflation.
If rent does not come down significantly and quickly, then the Fed is going to struggle with core inflation. Perhaps rents will stabilize, and a record supply of homes under construction may help the cause, but it is by no means a given.
