Chart of the Day: Has Inflation Already Peaked?




  • In Business
  • 2022-12-05 23:45:55Z
  • By The Fiscal Times

Strong economic data is raising the odds that the Federal Reserve will raise interest rates higher than previously expected and keep rates high for longer. "Stronger demand for labor, stronger demand in the economy than I previously thought, and then somewhat higher underlying inflation suggest a modestly higher path for policy relative to September," New York Fed President John Williams said last week. "Not a massive change, but somewhat higher."

At the same time, plenty of economists are concerned that the Fed may go too far in its battle against inflation, since it takes time for monetary tightening to work its way through the economy and show up in the statistics. By the time the official inflation rate drops, it may be too late to stop the economy from falling into a recession.

In an attempt to get ahead of the game, Fed economists look at a range of measures that can provide an early signal of what will happen with overall inflation in the coming weeks and months. As we told you last week, one key measure the Fed looks at, the Personal Consumption Expenditures price index, showed signs of easing last week. Bloomberg's John Authers on Monday looked at a variation of that measure, the "trimmed mean" version, and found that it suggests that inflation is already slowing.

"The latest hard data on inflation, the Personal Consumption Expenditure deflator for October, did confirm the message that inflation does look as though it may well have peaked," Authers says. "Using the Fed's favored measure of the 'trimmed mean,' which excludes the greatest outliers and takes the average of the rest, inflation did indeed tick down slightly last month, on both a year-on-year and month-on-month basis. There's still a long way to go, but it's important that this stripped-down measure of inflation beloved by purists is no longer accelerating."

"I don't think any of this proves that inflation will come down swiftly and allow the Fed to start easing in short order," Authers adds, "but it does suggest that the economy is slowly turning in the direction that anti-inflationistas want."

 

Like what you're reading? Sign up for our free newsletter.

COMMENTS

More Related News

Stocks Extend Fed-Fueled Rise in Asia; Dollar Dips: Markets Wrap
Stocks Extend Fed-Fueled Rise in Asia; Dollar Dips: Markets Wrap

(Bloomberg) -- Asian shares advanced with US and Europe futures on Thursday, extending a rally on Wall Street after Federal Reserve Chair Jerome Powell said ...

Bitcoin Jumps to Highest Since August in Post-Fed Crypto Rally
Bitcoin Jumps to Highest Since August in Post-Fed Crypto Rally

(Bloomberg) -- Bitcoin hit the highest since August as investors interpreted Federal Reserve Chair Jerome Powell's comments about progress on inflation as a ...

Risk-Hungry Investors See Powell
Risk-Hungry Investors See Powell's Nod as Green Light for Emerging Markets Rally

(Bloomberg) -- Emerging markets lit up green as Federal Reserve Chair Jerome Powell nodded at the progress made against US inflation, adding fuel to Wall...

Fed Rate Hike Smallest Since March 2022: Inflation Eases but Remains Elevated
Fed Rate Hike Smallest Since March 2022: Inflation Eases but Remains Elevated

As was expected, the Federal Reserve dialed back its hike, unanimously stating on Feb. 1 that it would raise interest rates by a quarter point for its first ...

Job market still hot, December openings rise to 11 million
Job market still hot, December openings rise to 11 million
  • US
  • 2023-02-01 15:06:07Z

U.S. job openings rose to 11 million in December, delivering a setback to the Federal Reserve's effort to cool a hot job market. Openings were up from 10.44...

Leave a Comment

Your email address will not be published. Required fields are marked with *

Cancel reply

Comments

Top News: Business