The familiar story of sticky US inflation
US core inflation remains persistently high.
Ahead of the 13-14 June FOMC meeting, where Fed Chair Powell is currently leaning towards pausing in raising rates, policy-markers will receive a payrolls report at the end of this week and another CPI release on the first day of the two-day meeting.
However, in terms of the Fed’s preferred measure of inflation, namely, the core PCE deflator, underlying inflation remains persistently high and has shown little change over recent months.
With core PCE inflation marginally above market expectations in April, annualised monthly inflation has been running at between 4½ and 4¾% for about a year now in trend terms, which is well above the Fed's 2% target.
Measures of the breadth of price gains are a little better, with, for example, annualised trend trimmed mean PCE inflation running at about 4½%, but still remains high.
Although hard to see on a chart, the San Francisco Fed estimates
that supply factors have made a slightly smaller contribution to trend core PCE
inflation, while the contribution from demand factors has picked up after
cooling a little at the end of last year and remains solid.
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Based in Sydney, Kieran Davies is Chief Macro Strategist at Coolabah Capital Investments, an asset manager with 40 executives and over $8 billion in fixed-income strategies. Kieran is responsible for macroeconomic research and investment strategy, contributing to the investment decisions of the firm. Kieran has long experience as a macroeconomist in both the private and public sectors. He has worked most recently as Chief Markets Economist for National Australia Bank and was previously Chief Economist, Australia and New Zealand, for Barclays Bank and ABN Amro Bank/RBS. Kieran also worked as Principal Adviser on the macroeconomy and budget policy in the Commonwealth Treasury and Director of Forecasting.
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Based in Sydney, Kieran Davies is Chief Macro Strategist at Coolabah Capital Investments, an asset manager with 40 executives and over $8 billion in fixed-income strategies. Kieran is responsible for macroeconomic research and investment strategy,...
Based in Sydney, Kieran Davies is Chief Macro Strategist at Coolabah Capital Investments, an asset manager with 40 executives and over $8 billion in fixed-income strategies. Kieran is responsible for macroeconomic research and investment strategy,...
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