A new inflation metric reported by the Bureau of Economic Analysis (BEA) on Thursday signaled a continuing rise in prices on Personal Consumption Expenditures (PCE), further reinforcing Federal Reserve Chairman Jerome Powell’s comments that additional interest rate hikes may be needed.
The latest monthly PCE price index report showed that headline PCE inflation was 3.3 percent year-over-year, and core PCE inflation — excluding food and energy prices — rose 4.2 percent from the same period in the previous year. This represents increases of 3.0 percent and 4.1 percent from the previous report, respectively, indicating that prices are trending higher on a month-to-month basis.
The PCE price index is the Federal Reserve’s preferred inflation gauge, and the continual acceleration of prices has significant implications for American households and small businesses. Indeed, since President Joe Biden took office, inflation in the US is up more than 16 percent.
“Inflation is accelerating again, revealing the fight against Bidenflation is far from over,” commented Job Creators Network President and CEO Alfredo Ortiz. “Rising inflation is reducing American living standards and making it more difficult for ordinary small businesses to remain profitable. The PCE price index remains more than 50% higher than the Fed’s target rate of just 2.0 percent, indicating that inflation is likely to continue upward.”
The BEA report noted that goods prices were down 0.3 percent from the previous month, and services prices were up 0.4 percent. Food prices increased by 0.2 percent and energy prices rose 0.1 percent. Excluding food and energy, the PCE price index still increased 0.2 percent.
In comments earlier this month acknowledging the rise in inflation, Federal Reserve Chairman Jerome Powell stated that additional interest rate hikes might be necessary to combat the rise in prices, something echoed by other policymakers. Rising inflation and interest rates can have a significant negative impact on the housing market, as buyers are priced out and sellers are unable to take advantage of the current market, leaving many stuck with costly mortgages that may be difficult to pay off.
It is clear from the latest PCE report that inflation is a serious concern that is likely to have continued implications for American households and small businesses. Individuals and small business owners should stay informed and be aware of any Federal Reserve decision that could increase the burden of an already concerning inflation rate.