WASHINGTON, May 28 (Xinhua) — A key U.S. inflation measure closely watched by the Federal Reserve posted its biggest year-on-year increase since the 1990s in April, indicating rising inflation pressures with the reopening of the economy, the U.S. Commerce Department reported on Friday.
The so-called core personal consumption expenditure (PCE) price index, the Fed’s preferred inflation measure, rose 3.1 percent last month from a year ago, the largest 12-month increase since the early 1990s, according to the department.
Including volatile food and energy prices, the headline PCE price index jumped 3.6 percent from a year earlier, well above the Fed’s inflation target of 2 percent.
“While the steep year-ago comparisons are largely attributable to low base effects after the lockdowns last April weighed on activity and prices, inflation is heating up,” Tim Quinlan and Shannon Seery, economists at Wells Fargo Securities, wrote Friday in an analysis.
“Although these recent price gains are undoubtedly associated with the reopening of the economy, they could prove lasting and have the potential to eat into consumers’ purchasing power,” they noted.
Roberto Perli, a former Fed staffer and now head of global policy research at Cornerstone Macro, said Friday that the latest figures bring average headline and core PCE indexes around 2 percent for the past few years.
But the Fed will think that its average inflation target of 2 percent “is still not in sight on a sustained basis” as the current increase of prices is likely unsustainable, Perli tweeted.
“Our best read is that worries about inflation could rattle confidence for a while, but the relatively healthy balance sheets of households and their desire to get out will outweigh the downside from higher prices on spending, at least for now,” Quinlan and Seery echoed.
U.S. Treasury Secretary Janet Yellen said on Thursday that she expected to see high inflation rates through the end of the year as the U.S. economy continues to recover from the pandemic.
“My judgment right now is that the recent inflation that we have seen will be temporary. It’s not something that’s endemic,” Yellen said at a virtual congressional hearing.
“I expect it to last, however, for several more months and to see high annual rates of inflation through the end of this year,” Yellen said, adding the Treasury and economists in the White House are monitoring inflation trends very carefully.
Originally Appeared Here