The Federal Reserve’s favored inflation gauge slowed sharply last month, an encouraging sign in the Fed’s yearlong effort to cool price pressures through steadily higher interest rates.
Mixed signals — including layoffs, strong job growth and lingering inflation — have clouded the U.S. economic outlook.“I can go get a $5 meal at Wendy’s, which isn’t even healthy, but that’s cheaper than buying the ingredients to make a meal at home,’’ said Jennifer Schultz of St. Joseph, Mo.
“Eggs started to skyrocket, meat’s gone up tremendously, a gallon of milk: staple products that our seniors needed — they were really being affected by the inflation and still are,” said Michelle Fagerstone, chief development officer at St. Joseph’s Second Harvest Community Food Bank. On Friday, the European Union reported that inflation in the 20 countries that use the euro currency slowed to its lowest level in a year as energy prices dropped, though food costs still rose, keeping pressure on the European Central Bank to raise rates further. Consumer prices in the eurozone jumped 6.9% in March from a year earlier, down from 8.5% in February. Eurozone inflation has been easing since peaking at 10.6% in October.
In the United States, the Fed is thought to monitor the inflation gauge that was issued Friday, called the personal consumption expenditures price index, even more closely than it does the government’s better-known consumer price index. Typically, the PCE index shows a lower inflation level than CPI. In part, that’s because rents, which have been among the biggest drivers of inflation, carry twice the weight in the CPI that they do in the PCE.
The PCE price index also seeks to account for changes in how people shop when inflation jumps. As a result, it can capture emerging trends — when, for example, consumers shift away from pricey national brands in favor of less expensive store brands.
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