Does the Fed prefer to ignore inflation on food and energy?
*Financial Times, by Chris Bryant, May 1, 2008
“US consumer struggles in face of inflation
US consumer spending rose more than expected in March but the bulk of the increase reflected higher costs for food and energy, a new report showed on Thursday.
The economic headwinds facing consumers were also reflected in the latest report on the US labour market which registered the highest number of Americans on unemployment benefits in four years.
Personal spending rose 0.4 per cent in the latest month, twice the rate forecast by economists and an improvement on the 0.1 per cent growth rate recorded the previous month.
Incomes rose 0.3 per cent, roughly in line with economists’ expectations after increasing by 0.5 per cent in March.
Adjusted for inflation, real spending increased only 0.1 per cent, having stalled in February while inflation-adjusted disposable income fell by slightly less than 0.1 per cent.
The core PCE price index, the Federal Reserve’s preferred inflationary measure which strips out food and energy costs, rose by 0.2 per cent, marking an increase of 2.1 per cent over the year, a fraction above the Fed’s stated comfort level of 2 per cent.”
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