PCE Inflation Revisions Remain Above Fed's Target Despite Methodology Changes
The Bureau of Economic Analysis (BEA) made annual revisions and methodological changes to three subcategories of the PCE price index. These adjustments significantly reduced inflation figures, such as a 34 basis point drop in core services from +3.69% YoY to +3.35%. Similarly, July's core goods PCE was revised down by 43 basis points due to changes related to computer software and accessories. Despite these downward revisions, the overall inflation rate remained well above the Federal Reserve’s target of 2%, with the revised core PCE at 3.01% YoY and all-items PCE at 3.4%. The adjustments did not bring inflation down enough for policymakers to consider easing monetary tightening. The changes highlight ongoing challenges in accurately measuring price trends, especially as economic conditions evolve post-pandemic.
Topics: BEA revisions Federal Reserve inflation PCE price index