Fed's Preferred Inflation Measure PCE Surpasses CPI by 0.6%

Jim Bianco, president of Bianco Research posted on X, highlights that the PCE inflation measure is now 0.6% above the CPI, nearing a 40-year extreme. This shift suggests the Fed's preferred measure is worsening compared to the public's choice, CPI. Historically, PCE was lower than CPI, except post-recession. The Fed is unlikely to cut rates soon as PCE rises while CPI falls. The question arises if the Fed will abandon its 2% PCE target due to inconvenience, as it did with the University of Michigan inflation expectations when they showed high readings.