SMP: More Interest Rate Hikes Ahead
My latest at the Sound Money Project is on more interest rate hikes ahead.
The Bureau of Economic Analysis released its latest personal consumption expenditures price index (PCEPI) estimation on February 24. The PCEPI is the Fed’s favored measure of inflation. The latest release points to more interest rate hikes in the future.
PCEPI grew 0.6 percent in January. This rate puts the 12-month PCEPI inflation rate at 5.4 percent, still significantly above the desired 2-percent level. For the two previous months, November and December, the 12-month PCEPI inflation rate was 5.6 percent and 5.3 percent respectively. Unlike other inflation measures, such as those based on the consumer price index (CPI) and core CPI, PCE’s 12-month inflation rate shows no clear sign of a downward trend. Given the Fed’s historical pace of increasing its interest rate target, and comments from the last FOMC meeting, it seems likely that the Fed will push interest rates even higher than they had previously projected.
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