by William J. Luther
The American Institute for Economic Research
When the Federal Reserve’s Federal Open Market Committee (FOMC) voted to lower its federal funds rate target last week and thereby begin the process of un-tightening monetary policy, it said FOMC members had “gained greater confidence that inflation is moving sustainably toward 2 percent.” In fact, inflation appears to have already moved to 2 percent. If anything, inflation appears to be somewhat below target today.
The Bureau of Economic Analysis (BEA) reports that the Personal Consumption Expenditures Price Index (PCEPI), which is the Fed’s preferred measure of inflation, grew at a continuously compounding annual rate of 2.2 percent over the last year. However, it has slowed considerably in recent months. PCEPI inflation has averaged 1.9 percent over the last six months and 1.4 percent over the last three months. In August 2024, it was just 1.1 percent.