U.S. Core PCE Inflation is Still Not Coming Down

In the United States, Core PCE Inflation is still 5.0% after a recent reversal in disinflation. This measure is followed by the Fed and excludes volatile food and energy inflation. It has remained elevated on an annualized quarterly basis, with a 1-year percent change of 5.0%, and a quarter-over-quarter annualized rate of 4.67%, well above the Fed’s goal of 2% inflation. Below (in blue) we see that Core PCE ticked back up last quarter.

Core PCE ticked back up last quarter

Even on a month-over-month basis, its annualized rate is 4.56%.

Core PCE Price Index

An alternative measure is the so-called “Supercore” inflation measure also known as Core CPI Services Less Housing. Fed Chair Powell focuses on this measure because it largely captures wage prices, which historically have been linked to inflation expectations. Supercore inflation is also still above 5%, but the most recent 1-month annualized level is 1.32%, which is a good sign. While one month is arguably not sufficient to predict the annual trend, using a slightly larger window of the past three months, we get a 4.04% annualized rate for this measure, showing the trend is moving down, but slowly.

Bloomberg CPI Supercore