Thursday, March 8, 2012

Inflation and the PCE target - no need for action

The index of choice for the the Fed is the PCE index not the CPI. Looking at PCE, the general index is moving back to 2% after overshooting based on high agricultural prices. The core PCE is below the 2% target but approaching it. With this view, it is hard to imagine that there will be any significant change in Fed activity either to increase or decrease quantitative easing.

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