The core inflation measure used by the Fed as its gauge of underlying inflationary pressures came in around expectations. The PCE core rate for the last twelve months came in at 1.9%, in line with the Fed's implied target of 2%. That should soothe the savage market beast for today, contrary to my expectation yesterday.

Whether this will help provide a "convincing demonstration" of a reduction in inflation risk remains to be seen. Consumer sentiment and the purchasing manager indices both beat expectations, indicating the economy is still a little stronger than we might have guessed. Given that the Fed staff at least is looking at constrained supply factors as its rationale for rising inflationary expectations, you might think inflation is still there for the worrying.

Labels: economics