Key inflation indicator posts biggest year-over-year gain in nearly three decades
A key inflation indicator that the Federal Reserve uses to set policy rose 3.4% in May from a year ago, the fastest increase since the early 1990s, the Commerce Department reported Friday.
Though the gain was the biggest since April 1992, it met the Dow Jones estimate and markets reacted little to the news. The stock market posted mostly solid gains, while government bond yields were moderately higher.
The core personal consumption expenditures price index increase reflects the rapid pace of economic expansion and resulting price pressures, and amplified how far the nation has come since the Covid pandemic-induced shutdown of 2020.
Inflation has spiked recently amid a confluence of factors. They include supply chain disruptions in which manufacturers of key products have been unable to keep up with escalating demand that has come with the economic reopening.
Soaring real estate prices also have played a factor as lumber costs have soared, though that trend has reversed lately.
Finally, the current numbers are influenced by what economists call “base effects,” or skewed comparisons with a year ago when government restrictions put much of the economy in limbo. Those base effects are likely to dissipate when the June numbers come out next month.
Reference: CNBC
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