Powell: process of getting inflation to 2% “has a long way to go”
The US Department of Commerce will publish new data Friday on where inflation is at in the US. The Bureau of Economic Analysis will release the Personal Consumption Expenditure (PCE) Price Index for May. This is the Federal Reserve’s preferred inflation measure, as it gives a clearer picture of how price rises are affecting households.
Speaking at the Bank of Spain on Thursday, Fed Chair Jerome Powell said that it’s estimated that the headline PCE dropped last month to 3.9%, while core inflation was unchanged year-over-year. The day before, Powell addressed an ECB Forum where he said that inflation isn’t expected to reach the Fed’s target of 2% until 2025.
One of the challenges for policymakers is the strong labor market which is “pulling the economy.” Last week saw initial unemployment claims drop by the most in 20 months, showing that despite some signs of softening the US labor market remains resilient.
Powell said on Wednesday that the majority of the FOMC sees at least two more rate hikes before the end of the year. And despite the pause in June, there is nothing stopping them from being consecutive.