Another blatant contradiction to the White House’s claim that President Joe Biden has tamed the worst inflation crisis in 40 years has occurred as a result of personal use expenditures cost index inflation, one of the Federal Reserve’s recommended gauges of price instability, which has increased for the first time since September of last year.
Headline PCE inflation rose by 2.5 % in the year ending in February, up from 2.4 % in January. While 12- month core PCE inflation, which strips away the volatile categories of food and energy, slightly fell from 2.9 % to 2.8 %, the six- month annualized rate rose to 2.9 % in February, up from 1.9 % in December and 2.6 % in January.
The Fed’s battle on inflation had evidently fallen off after considerable progress had already been made, bringing the rate back from its nearly double-digit peak in 2022. Core CPI had stagnated at 3.8 %, while CPI inflation was already back on the rise at an annual rate of 3.2 %, according to the consumer price index’s February print. Meanwhile, wholesale prices, leading indicators of consumer inflation, blew past economist expectations, jumping from 1 % annually in January to 1.6 % in February, and core PPI came in even higher at 2 %. Furthermore, in its March Summary of Economic Projections, the central bank itself upgraded median core PCE projection for 2024 from 2.4 % to 2.6 %.
In other words, in the 12 month ending in February, article CPI, title PPI, and title PCE prices all rose. Core CPI and base PPI held regular. Of all the Fed’s key measures of price instability, only one, core PCE, truly fell on a 12- month basis, but as evidenced by the quick acceleration of its 6- month annualized rate, the main fundamentals of core PCE are going in the wrong direction.
Half of the Fed’s primary prices measures are on the increase, two are stagnant, and only one is hardly slowing. The Fed is no longer winning the third against inflation, even though it may be able to accomplish the third of its soft landing, which calls for not forcing the economy to recession. Can we really say that’s a “landing”, even if it’s a” soft” one, at all anymore?
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However, the fiscal policy of the White House remains proudly inflationary. The president’s proposed budget for 2025 would be a third consecutive fiscal year of a$ 2 trillion deficit.
The Fed has undoubtedly made great progress thus far in fighting inflation, but at long last, it seems clear that even if it does n’t need explicit help from the White House, it cannot be actively undermined by Biden’s budget boondoggles. The war on inflation is far from over, and it is worsening for everyone else, not just the Fed, but the rest of us, who have already paid in the form of costs that have increased by 18 % since Biden took office, and are obviously facing an even steeper price increase in the future.
