In normal conditions, a string of high inflation numbers would because for concern.
However, in the current Covid era, they were seen as confirmation insome sectors that inflation is just following the script, growing due toone-off bottlenecks and the result of a distorted comparison to a year ago when most of the U.S. economy was shut down.
According to the metric that Fed officials like to use the most, Maysaw yet another big increase.
On a year-over-year basis, the personal consumption expenditurescore index – excluding food and energy costs – climbed 3.4 percent, matchingWall Street projections but also marking the largest gain since April 1992.
The Friday PCE figure had minimal impact on the markets, with stockslargely rising and government bond yields rising relatively marginally.
That's because, while the inflation data has prompted analogies tothe 1970s' runaway inflation scenario, the numbers, at least for now, favorthose anticipating the trend to decline and then stabilize at lower levels.
The Commerce Department's publication was "straight down thestrike zone," according to Mark Zandi, chief economist of Moody'sAnalytics. The PCE level is "consistent with the view that the increase in inflation will be transitory, that it's due to the economy's reopening and some of the disturbances that result from that swift reopening," according to the report.
In the short term, at least, the idea that inflation will eventuallyfade is cold comfort to people who have been hit with greater costs.
Everything has been on the rise, from airline tickets to hotel staysto the cost of buying a home, and it shows no indications of slowing down. InMay, the consumer price index increased by 5% over the previous year, while the producer price index increased by 6.6 percent, the fastest increase on record.
Consumers Are Paying More For Almost Everything These Days.
According to the Energy Information Administration, gasoline pricesare up 20% from pre-pandemic levels and 46% from a year ago. According to theBureau of Labor Statistics, beef and pork prices are rising in the grocery store, with bacon up 18.7% from a year ago, ham up about 8%, and milk up around 9%.
Those forces have drawn the attention of Fed policymakers, who arekeenly monitoring inflation to see if and when they should abandon theultra-easy monetary policy measures that they have implemented during the pandemic.
Raphael Bostic, president of the Atlanta Fed, cautioned this weekthat inflationary pressures may be larger and longer-lasting than previouslyexpected, while James Bullard, president of the Federal Reserve Bank of St. Louis, expressed alarm as well.
“A new danger is that inflation will surprise even further to theupside as the reopening process progresses, beyond the level required to simplymake up for prior low-side misses,” Bullard warned Thursday.