Payden & Rygel: Year-to-date change in core US PCE Inflation

Payden & Rygel: Year-to-date change in core US PCE Inflation

22 september 2025

Inflatie Fed

At the September FOMC meeting, the Fed cut its policy rate by a quarter point, its first rate reduction of 2025. At the press conference, Chair Powell described the dilemma policymakers face that may slow the pace of rate cuts: the persistence of sticky inflation and higher unemployment.

But are inflation and full employment really at odds with each other? In our view, a weaker labor market will eventually lead to further services disinflation, mitigating upside risks to inflation. Further, while Powell is right that year-over-year core PCE inflation was 2.9% in July 2025, unchanged from December 2024, goods prices added 0.3 percentage points to the core PCE year-over-year rate. Meanwhile, housing and nonhousing service prices moderated year-to-date, subtracting a combined 0.3 percentage points from the year-over-year core PCE rate, thereby offsetting the rise in goods prices. 
If the jump in goods prices is due to tariffs and will fade in 2026, and a softer labor market means softer service prices, moderation in overall inflation might have investors rejoicing that, after years of elevated inflation, 'it's all good(s)'.

Gerelateerde berichten