Fed’s favorite inflation indicator surges

The Fed’s preferred measure of inflation, the Personal Consumption Expenditure (PCE) Index grew by 3.9% in the 12 months ended May ’21, while Core PCE (excluding food & energy) came in slightly lower at 3.4%.

Personal Consumption Expenditure Index: Annual Change

We still have to watch out for base effects, because of the low readings in May last year, but growth for the past 6 months is even higher, registering 5.3% (PCE) and 4.6% (core PCE) annualized gains.

Personal Consumption Expenditure Index: 6-Month Change


Excluding temporary price spikes due to supply chain disruption, we expect inflation to average a minimum of 4.0% over the next three years.