In August, Americans were forced to spend more due to higher gas prices, and the Federal Reserve’s main inflation gauge rose more than expected, suggesting that the road to lower inflation isn’t going to be easy.
The PCE, which is based on the Fed’s official two percent target and the forecasts of policy makers, rose by 2.4 percent from the previous month, double the rate of the year before. Core prices – which don’t include food and energy – also rose, but by more than 2.9 percent compared to the year before.
Core inflation, according to the Federal Reserve and most economists, is a better way to measure inflation in the real economy and thus a better predictor of future inflation. But critics argue that too much weight should be given to core inflation, which could lead politicians to ignore the effect that higher food and energy costs are having on people’s lives.
Fed Chair Jerome Powell has stressed that he looks at both headline inflation and core inflation, and has often said that he’s also paying attention to what some now refer to as “super-core” inflation, which strips out housing, fuel, and energy.