Source: Bloomberg
Author: Molly Smith, Christopher Condon
A rough look, an important American inflation indicator announced on Friday was stable in March.But if you see two or three digits after the decimal point, you will find that it actually has picked up.
This difference is important because the personal consumption expenditure price index (PCE) is the inflation indicator favored by the Federal Reserve decision makers, and will eventually affect their views on when to cut interest rates.
According to the data reserved by the US Economic Analysis Administration to a decimal point, the core PCE without food and energy prices after March rose 0.3%for the second month in a row.However, a deeper analysis will find that the increase is accelerated from 0.27%to 0.32%, and data from January and February has been repaired.
This difference may be small from the perspective of monthly data, but it has much impact on the annualized figures as the Federal Reserve's goal.For example, the monthly increase of 0.25%and 0.34%will be 0.3%.But in 12 months, the inflation rates will be 3.04%and 4.16%, respectively.
Ernst & Young Chief Economist Gregory Daco said that these annualized data will have a very different impact on monetary policy, especially now.
"The Fed's dependence on data is so high, it can be said that it is too focused on formulating policies one by one, so that each report will be overly interpreted, and only based on the overall data," he said."The degree of attention to each data is getting higher and higher, making it more important to understand what the data is revealed and the direction of inflation."
The recent data shows that the inflation is only sideways, or it may be rebounded again.The core PCE index in March rose 2.8%year -on -year in the second month.
But the report released on Thursday showed that the core PCE jumped from 2%in the first quarter to 3.7%in the first quarter.This is higher than the expectations of economists and leads to a plunge in US Treasury bonds, as traders further postpone betting on interest rate cuts.After the March data announced on Friday meets expectations, US Treasury bonds have rebounded.
Economists do not always take such a careful look at inflation data, Chris Low, chief economist of FHN FINANCIAL.LOW has been employed for 35 years, and he and his colleagues have begun the PCE and consumer price index -another inflation indicator -the prediction of the PCE and the consumer price index -another two digits after the inflation indicators that have received close attention.He said that this is the first time that CPI data has become more important than employment reports.
Although the Fed's inflation target is based on PCE data, CPI is also important because the data is released a few weeks earlier and linked to the inflation preservation national debt.This means that the CPI is more important after the decimal point, and the PCE can accurately reach the two -point two -point.
