The Fed’s preferred measure of inflation, the U.S. personal consumption index, rose 6.3% in May. That’s more subdued than the surging consumer price index, but the latter offers a better read on household spending, writes GinaChon.
U.S. Federal Reserve Board Chairman Jerome Powell faces reporters after the Federal Reserve raised its target interest rate by three-quarters of a percentage point to stem a disruptive surge in inflation, during a news conference following a two-day meeting of the Federal Open Market Committee in Washington, U.S., June 15, 2022.WASHINGTON, June 30 - The U.S. Federal Reserve’s preferred measure for inflation may leave it flat-footed when battling rising prices. The U.S.
That’s because they are calculated differently. CPI depends on household surveys while the PCE index relies on businesses, among other differences. Because the former puts more weight on everyday items like gas and food, it can be a better indicator of consumer sentimentRegister now for FREE unlimited access to Reuters.comalso tracks consumer prices, the primary measure of success in hitting its 2% inflation target is based on the PCE index.
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