The January Personal Income and Outlays report for December was published today by the Bureau of Economic Analysis. The first chart shows the monthly year-over-year change in the personal consumption expenditures (PCE) price index since 2000. I've also included an overlay of the Core PCE (less Food and Energy) price index, which is the Fed's preferred indicator for gauging inflation.
The latest Headline PCE price index year-over-year rate of 1.35% is a decrease from last month's adjusted 1.42%. The Core PCE index of 1.32% is decrease from the previous month's adjusted 1.44%.
On the chart below, I've highlighted the 2% to 2.5% range. 2% has generally been understood to be the Fed's target for core inflation. However, the Dec. 12 FOMC meeting raised the inflation ceiling to 2.5% for the next year or two, while their accommodative measures (low FFR and quantitative easing) are in place.
I've calculated the index data to two decimal points to highlight the change more accurately. It may seem trivial to focus such detail on numbers that will be revised again next month (the three previous months are subject to revision and the annual revision reaches back three years). But PCE is a key measure of inflation for the Federal Reserve, and the price increases in oil and gasoline, although now well off their interim highs, puts consumer behavior in the spotlight.
For a long-term perspective, here are the same two metrics spanning five decades.
Note: I use the data from Table 9 in the full release and tables available here.