The Federal Reserve’s preferred gauge for measuring inflation, the personal consumption expenditures (PCE) price index, has risen slightly in November, according to the Commerce Department’s report on Friday. This development brings the Federal Reserve closer to achieving its inflation target.
The PCE price index rose by 0.1% in November, and has climbed 3.2% since the same time last year. This data has been compared to the respective 0.1% and 3.3% that Dow Jones economists were predicting; however, the results were slightly lower than anticipated. Despite this, the overall indication of inflationary pressure still remains.
Over the past year, various factors have contributed to the increasing prices. The supply chain issues, labor shortages, and massive government stimulus are three things that experts have cited as drivers from the current inflation surge. The Federal Reserve has acknowledged these pressures as transitory and has signaled that it plans to keep interest rates at their current low levels for the foreseeable future.
The Federal Reserve’s dual mandate is to maintain maximum employment while keeping the prices stable through monetary policy. Inflation has been a particular point of concern for the bank as it has remained below its target of 2% for the previous decade. The current inflation surge is seen as evidence that the bank’s policies are successfully raising prices to meet its objectives.
The Federal Reserve has already started to taper off its bond-buying program, which has helped to fuel America’s recovery from the pandemic. Chief of the Federal Reserve, Jerome Powell, hinted at an accelerated tapering of the stimulus program, linking it to the current inflation numbers. However, the bank remains committed to its primary goal of achieving maximum employment in the US, and the surge in prices can be seen as a byproduct of that aim.
Ultimately, the recent inflation numbers are seen as a signal of progress on the road to the Federal Reserve’s 2% inflation target. However, the central bank could still face headwinds in its efforts to push the rates higher as the state of the economy remains uncertain due to the ongoing pandemic. Therefore, the bank will continue to monitor the inflationary pressures and adjust its policies accordingly.