The latest inflation data is not what Federal Reserve officials were hoping for. The Personal Consumption Expenditures Price Index (PCEPI), which is the Fed’s preferred measure of inflation, grew at a continuously-compounding annual rate of 4.2 percent from April 2022 to April 2023, up from 4.1 percent for the twelve-month period ending in March 2023. The PCEPI has grown 4.1 percent per year since January 2020, just prior to the pandemic. Prices today are 7.7 percentage points higher than they would have been had the Fed hit its 2 percent target over the period.

Core inflation, which excludes volatile food and energy prices and is thought to be a better predictor of future inflation, also remained high. Core PCEPI grew 4.6 percent from April 2022 to April 2023, up from 4.5 percent for the twelve-month period ending in March 2023. Core PCEPI has grown 3.8 percent per year since January 2020, and is now 6.5 percentage points above the target growth path expected prior to the pandemic.

Fed officials may worry that the disinflation process has stalled. For this reason, the latest data likely increases uncertainty about the future course of monetary policy.

[In other words … grab your shorts. I don’t the stall is too dramatic, but monetary policy alone clearly isn’t working. We need a strong agenda of supply-side policies, but we’ll never get them from the Biden administration and the Democrats. — Ed]