US inflation hits Fed target only one time since 2012

US inflation hits Fed target only one time since 2012

The graph shows that inflation in the United States has met the Federal Reserve’s 2 percent goal just one time since 2012.

The PCE deflator, the Fed’s favorite inflation measure, managed to reach the Fed target in one month since 2012, while the core PCE, not including food and energy, has failed to hit the Fed target since 2009.

Federal Reserve Bank of New York President William Dudley expected on Monday that further tightening in labor market would eventually push inflation back to the Fed target.

Last week, the Fed raised interest rates, maintaining estimates for at least one rate hike before the end of the year while announcing plans to reduce the massive $4.5 trillion balance sheet.

Cutting balance sheet would mean more tightening and therefore could put more downward pressure on inflation that has weakened in recent weeks.

Ahmed Mamdouh

Ahmed Mamdouh, Co-Founder and Head of English Fundamental Analysis at FXComment.com, with 7 years of experience in the financial markets. Mamdouh holds a Master’s Degree in Economics from The American University in Cairo and a Bachelor Degree in Economics from The Faculty of Economics and Political Science, Cairo University.

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