March 1, 2022

Chart of the Week: US inflation highest since 1983 on key Fed measure

by Fathom Consulting.

US inflation as measured by the Personal Consumption Expenditure deflator rose 6.1% over the twelve months to January, from 5.8% previously – the highest reading since February 1982. The core measure, excluding food and energy, rose by 0.3 percentage points to 5.2% – its highest since April 1983. Amid an extremely tight labour market and increasing concerns that inflation expectations could slip their anchor, the US Federal Reserve (Fed) is highly likely to begin raising interest rates at its upcoming meeting on 15-16 March. A 25-basis point rise seems probable. Some committee members appear open to a 50-basis point increase, although the Russian invasion of Ukraine may have reduced the probability of such a move. The February employment report on Friday, 4 March, is a key release to watch ahead of the meeting. With the Fed increasingly behind the curve, a series of rate hikes seems likely this year. The updated Summary of Economic Projections released alongside the meeting will provide greater clarity on the committee’s latest thinking.


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