Trimmed-Mean PCE Inflation for June

Here's the bad news you heard about:

Trimmed-Mean PCE Inflation Rate, Dallas Fed: June 2006The trimmed-mean PCE inflation rate for June was an annualized 3.1 percent. According to the BEA, the overall PCE inflation rate for June was 2.1 percent, annualized, while the inflation rate for PCE excluding food and energy was 2.9 percent. ...

One-month PCE inflation, annual rate

Jan. 06 Feb. 06 Mar. 06 Apr. 06 May 06 Jun. 06 PCE 5.9 0.9 4.3 5.6 4.6 2.1 PCE excluding food & energy 2.0 1.9 3.7 2.7 2.8 2.9 Trimmed-mean PCE 2.9 2.0 3.4 3.0 3.1 3.1

Six-month PCE inflation, annual rate

Jan. 06 Feb. 06 Mar. 06 Apr. 06 May 06 Jun. 06 PCE 3.3 2.6 1.5 1.9 3.5 3.9 PCE excluding food & energy 2.2 2.3 2.4 2.3 2.4 2.7 Trimmed mean PCE 2.5 2.4 2.4 2.5 2.6 2.9

12-month PCE inflation

Jan. 06 Feb. 06 Mar. 06 Apr. 06 May 06 Jun. 06 PCE 3.2 3.0 2.9 3.0 3.4 3.5 PCE excluding food & energy 2.0 2.0 2.0 2.2 2.2 2.4 Trimmed mean PCE 2.4 2.3 2.4 2.5 2.6 2.7

NOTE: These data are subject to revision

...The following chart plots the evolution of the distribution of price increases in the monthly component data over the past year. The chart shows the percentage of components each month, weighted by their shares in total spending, for which prices grew between 0 and 2 percent (at an annual rate); between 2 and 3 percent; between 3 and 5 percent; between 5 and 10 percent; and more than 10 percent.

For more on inflation and the Fed, see William Polley's "Inflation continues to creep upward... what next for Fed?" I'm hoping our local Fed Watcher will tell us what he thinks the Fed will do next week. Cleveland Fed calculations say markets aren't entirely sure:

What do you think the Fed should/will do?

Comments

[hj]

Roubini argues that whatever the FED does, a recession is coming. So perhaps it makes little difference.

http://www.rgemonitor.com/blog/roubini/138792/

[dryfly]

I think they will & should pause.

Two reasons:

(1) Give the conflicting data time to 'line out' one way or the other... one more month won't make a big difference on an input that takes six months to have its full effect. August is pretty sleepy anyway.

(2) Plus no law says they have to wait until the next meeting if they pause this particular meeting... they could agree to pause now, then if more data comes in mid-month that clearly indicates inflation is the greater risk... do a quick conference call, get the votes and raise.

Make the options clear to the markets & public in the communique. That way they can have it both ways... pause now with the message they might raise at anytime if necessary. It would buy them time.

[Winslow R.]

I'll go on record for a pause as I still hold out faint hope Bernanke/Bush would not push us into a major recession just 5 years into this weak recovery.

This is some anecdotal evidence of the current slowdown already disrupting the lives of people I interact with on my son's competitive soccer team (7 of 12 players from last year - 5 were cut or quit). One father lost his job (software sales) about 3 months ago (his wife dumped him and the kids), another father is in the process of being laid off along with 1000 other employees of a large telecom company (head design engineer) Two other fathers switched jobs in the last 6 months, both in technical fields and are still having trouble adjusting. Two fathers are involved in the slowing real estate market. One father is doing great (since 9/11) as a fencing contractor, isolating vulnerable infrastructure from terrorist attack.

[hj]

"One father is doing great (since 9/11) as a fencing contractor, isolating vulnerable infrastructure from terrorist attack."

Oh me oh my. That is funny hysterical. Thanks.

[Movie Guy]

I visited the web site. Thought I might a similar measurement applied solely to intermediate goods. Nope.