Key U.S. inflation gauge surges again in June

WASHINGTON, July 31 — A key U.S. inflation measure closely watched by the Federal Reserve surged again in June, indicating rising inflation pressures tied to supply constraints, the U.S. Commerce Department reported on Friday.
The so-called core personal consumption expenditures (PCE) price index, the Fed’s preferred inflation measure, jumped 3.5 percent in June from a year ago, the largest 12-month increase since 1991, according to the department.
Including volatile food and energy prices, the headline PCE price index rose 4 percent from a year earlier, the fastest annual pace since 2008, well above the Fed’s inflation target of 2 percent.
“Gains in used vehicle prices and a rebound in airline fares, hotel room rates and rental car fees accounted for the bulk of those gains,” Diane Swonk, chief economist at Grant Thornton, a major accounting firm, said Friday in an analysis.
“Federal Reserve Chairman (Jerome) Powell stressed how the rise in those prices appears more transitory than permanent, given bottlenecks triggered by the pandemic and the rush by consumers to resume travel and tourism,” Swonk said, adding those prices should moderate substantially in the second half of the year and in 2022.
“If they do not, the Fed is prepared to end its asset purchases and raise rates in 2022,” she said.
The Fed has pledged to keep its benchmark interest rate unchanged at the record-low level of near zero, while continuing its asset purchase program at least at the current pace of 120 billion U.S. dollars per month until “substantial further progress” has been made on employment and inflation.
At a press conference Wednesday afternoon, Powell said the Fed hasn’t made the decision regarding the timeline of tapering its asset purchases, but Fed officials expect the economy to continue moving toward the standard of “substantial further progress.”
A recent survey by Bloomberg showed that most economists expected the Fed to formally announce tapering asset purchases in December, with actual reductions starting in the first quarter of 2022. (Xinhua)