The Fed’s Preferred Inflation Gauge Cooled Overall in September

Inflation is a key economic indicator that can have a significant impact on a country’s economy. The Federal Reserve closely monitors inflation levels to determine the appropriate monetary policy needed to achieve its dual mandate of maximum employment and stable prices. One of the measures the Fed uses to track inflation is the Personal Consumption Expenditures (PCE) price index, which is considered the central bank’s preferred inflation gauge.

In September, the PCE price index showed a cooling in overall inflation. The index rose by 0.2% in September, which was below the 0.3% increase seen in August. On a year-over-year basis, the index increased by 4.3%, down slightly from the 4.4% rise in August. This moderation in inflation is likely to be welcomed by the Fed, as it may alleviate some concerns about runaway price increases.

The decrease in overall inflation was largely driven by a slowdown in the prices of goods, which rose by just 0.1% in September compared to a 0.8% increase in August. In particular, the prices of durable goods, such as cars and appliances, saw a decline in September. Meanwhile, services prices continued to rise, increasing by 0.3% in September.

One factor that may have contributed to the moderation in overall inflation is the easing of supply chain disruptions that have plagued the economy in recent months. As supply chain bottlenecks ease, the prices of goods may start to stabilize, helping to alleviate some of the inflationary pressures.

Despite the cooling in overall inflation, there are still concerns about rising prices in certain sectors of the economy. For example, the prices of energy and food continue to increase, which can have a significant impact on consumers’ budgets. Additionally, the ongoing labor shortages and wage pressures could lead to higher prices for services in the future.

Overall, the Fed’s preferred inflation gauge cooling in September is a positive development that may provide some relief for policymakers worried about rising prices. However, it is important to continue monitoring inflation levels closely to ensure that the economy remains on a stable path. The Fed will likely take this latest data into account as it considers its next steps in setting monetary policy to achieve its dual mandate of maximum employment and stable prices.