On August 25, although Fed chair Jerome Powell’s message at Jackson Hole in Wyoming was not as brief as last year’s, it was still equally unambiguous. 2% still remains the non-negotiable target for the inflation rate, and the Central Bank is prepared to raise policy rates further if required and hold them higher for longer until it is confident of sustained price stability.
The 12-month PCE has declined to 3% as of July from its peak of 7% in June 2022 due to a significant unwinding of the demand-supply imbalance. However, the core PCE, which excludes volatile food and energy prices and includes inflation for goods, housing services, and all other services, came in at 4.3% in July, indicating significantly more ground left to cover through monetary policy tightening.
