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How Quickly Can Monthly Inflation Predict Annual Inflation?
After peaking at 7.1% in June 2022, inflation—measured as the year-over-year percent change in the personal consumption expenditures (PCE) price index—has been falling toward the Federal Reserve’s target of 2%. As of April 2024, PCE inflation (the Fed’s preferred measure) stood at 2.7%. Because inflation is typically measured over the past year, it is inherently a slow-moving and backward-looking measure. Even if monthly inflation were to fall to zero, it would take a few months before annual inflation hit 2%. As inflation gradually eases, how soon will economists know when annual inflation returns to 2%? In ... (full story)