by William J. Luther
The American Institute for Economic Research
Federal Reserve officials have been hoping for evidence that inflation is returning to target. The latest data from the Bureau of Economic Analysis (BEA) should give them some confidence. The Personal Consumption Expenditures Price Index (PCEPI), which is the Fed’s preferred measure of inflation, grew at a continuously compounding annual rate of 0.9 percent in June 2024, bringing the three-month average annualized rate down to 1.5 percent. The PCEPI has grown 2.5 percent over the last year and 3.7 percent per year since January 2020, just prior to the pandemic. Prices today are 8.8 percentage points higher than they would have been had the Fed hit its 2-percent inflation target over the period.
Core inflation, which excludes volatile food and energy prices, also remains low. Core PCEPI grew at a continuously compounding annual rate of 2.2 percent in June 2024, and 2.3 percent over the last three months. Year-on-year core PCEPI growth is now 2.6 percent, compared with the 3.6 percent core PCEPI inflation realized per year since January 2020.