June 28, 2021 — PCE Up 3.4 Percent in May


The PCE (personal consumption index) rose 3.4 percent on a year-over-year basis in May, after rising 3.1 percent in April.  The increase was anticipated, but it was also the greatest increase recorded since April 1992.  The PCE is the index the Fed officials reference when addressing inflation.

The data release has not spurred a call to raise rates, as the Fed is steadfast the rise in the inflation rate is temporary and will settle down over the coming months. The PCE level is consistent with a surge in inflation arising from the re-opening of the economy and the associated disruptions of a quick change in circumstances.

Fed Presidents Bostic (Atlanta) and Bullard (St. Louis) have stated they think inflation is stronger and more durable than previously thought and are becoming concerned.  The Fed likes inflation to hover around the two percent mark, but said it’s willing to let it rise higher as long as the long-term average stays close to two percent. While, San Francisco Fed president Mary Daly said the Fed’s asset purchases should be looked at before taking action on interest rates.