Robin Harding

December core PCE came in at at a new low of +0.7 per cent on a year ago. The Dallas Fed trimmed mean PCE was steady at +0.8 per cent on a year ago, but the six-month annualised rate ticked up to +1.0 per cent, which is an interesting trend.

I post these numbers so often because an end to disinflation is the goal of QE2 that remains to be achieved. Plenty of analysts anticipate a stabilisation – in particular they expect the large housing component of PCE to stop dragging it down – but there are still only hints of this in the data.

If core PCE continues to drift downward in the next few months to, let’s say, 0.5 per cent in April, then I think there are FOMC members whose instinct would be to go beyond $600bn. Read more

Robin Harding

Today’s CPI data (headline +1.5% yoy, core +0.8%) has led to a rush of analyst emails proclaiming that US disinflation is dead. This chart is indeed looking a little less threatening:

I’ve seen two main arguments why core inflation is not going to go down any further. Both are quite plausible but I still have doubts. Read more