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A key inflation metric is now headed in the wrong direction
(Larry Brown Sports)
No, the other way.
A key data point for one Federal Reserve bank president is headed in the wrong direction.
The Dallas Trimmed Mean PCE inflation rate, a broad measure of inflation, is slipping for one- and six-month benchmarks, according to Fed data released Wednesday November 25.
James Bullard, president and CEO of the St. Louis Federal Reserve Bank, might not regard this as good news.
It's a sign that inflation in consumer prices is slowing. And that's not a good sign for the Federal Reserve as it prepares to hike interest rates. Higher rates could could put further pressure on prices, which is not good.
Business Insider recently asked Bullard which of inflation, wage growth, and unemployment would be most important to the Federal Reserve as it weighs its rate hike, expected as soon as next month. Here's what Bullard told us in late September this year:
"Of those three, by far the most important by far is inflation. Inflation is running low right now. A lot of that is because oil prices. But low oil prices are ultimately a bullish factor for the US economy. For that reason you might want to try to look through the low prices of oil today, and instead be looking to a measure like the Dallas Fed trimmed measure mean inflation rate, which is running at 1.6%.
Certainly, you want everyone to get paid as much as possible, but wages are going to be a trailing factor. Another thing about wages, especially looking at nominal wages, there's a productivity factor in there because … your wage could go up because productivity was higher, or because of inflation. Both of those factors have been low and wage growth has been low in response to that."
The chart below highlights the drop in one- and six-month PCE rates; the 12-month rate has held steady.
(The Dallas Federal Reserve)
The Dallas Trimmed Mean PCE inflation rate, updated for October 2015 stats
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