While inflation hasn’t picked up in the latest inflation reports, that effect could soon disappear. Speaking in a webcast interview with the Quad Cities Regional Business Journal, Chicago Fed President Austan Goolsbee noted that the recent personal consumption expenditures (PCE) index could be the “last vestige” of pre-tariff times.
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April’s PCE index, which tracks the prices that consumers spend on goods and services, showed yearly growth of 2.1%, below the consensus estimate for 2.2%. The core PCE, which is the Fed’s preferred inflation gauge and excludes volatile food and energy prices from the PCE, was 2.5%, in line with the estimate.
Goolsbee Warns of Tariff Impact on Inflation
Goolsbee also stated that he was a bit “gun-shy” in the belief that tariffs will only have a transitory effect on inflation and that inflation reports in the next one to two months could begin to show the effects of higher duties. At the same time, if trade policy is resolved, rates could be a “fair bit” lower with the next 12 to 18 months.
The next Fed rate announcement is set for June 18, with traders pricing in a 95.3% probability that rates will remain steady between 4.25% and 4.50%.
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