Inflation Figure That The Fed Follows Closely Hits Highest Level Since January 1982

• The latest read on inflation is undermining the Fed’s most recent dovish tone and has showed that the Fed may have even more work to do. An inflation gauge that the Federal Reserve uses as its primary barometer jumped to its highest 12-month gain in more than 40 years in June, the Bureau of Economic Analysis (BEA) reported on July 29.
• The personal consumption expenditures price index rose 6.8%, the biggest 12-month move since the 6.9% increase in January 1982. The index rose 1% from May, tying its biggest monthly gain since February 1981.
• Excluding food and energy, so-called core PCE increased 4.8% from a year ago, up one-tenth of a percentage point from May but off the recent high of 5.3% hit in February. On a monthly basis, core was up 0.6%, its biggest monthly gain since April 2021.
• Both core readings were 0.1 percentage point above the Dow Jones estimates. Fed officials generally focus on core inflation, but have turned their attention recently to the headline numbers as well, as food and fuel prices have soared in 2022.
• The BEA release also showed that personal consumption expenditures, a gauge of consumer spending, increased 1.1% for the month, above the 0.9% estimate and owing largely to the surge in prices. Real spending adjusted for inflation increased just 0.1% as consumers barely kept up with inflation. Personal income rose 0.6%, topping the 0.5% estimate, but disposable income adjusted for inflation fell 0.3%.
• Earlier this month, data showed the consumer price index rose 9.1% from a year ago, the biggest gain since November 1981. The Fed prefers PCE over CPI as a broader measure of inflation pressures. CPI indicates the change in the out-of-pocket expenditures of urban households, while the PCE index measures the price change in goods and services consumed by all households, as well as nonprofit institutions serving households.

(Source: CNBC)