By undershooting its inflation target after clearly stating it would not do so, the Fed risks surprising the public—and perhaps triggering a recession.
by William J. Luther
The Daily Economy
Will the Federal Reserve undershoot its inflation target this year? The Personal Consumption Expenditures Price Index (PCEPI) grew at an annualized rate of 1.2 percent in April 2025, marking the second consecutive month of below-target inflation. PCEPI inflation has averaged 2.1 percent over the last three months and 2.6 percent over the last six months.
Core inflation, which excludes volatile food and energy prices, also remained low. Core PCEPI grew at an annualized rate of 1.4 percent in April 2025, after growing just 1.1 percent in the prior month. Core PCEPI inflation has averaged 2.7 percent over the last three months and 2.6 percent over the past six months.