35. What Is CPI, PPI & PCE Price Index (Indices) in Fed Speak - Decoded

May 10, 2024

Dive into the latest insights from the FOMC press conference led by Jerome Powell! Discover what inflation measures like CPI and PCE mean for the economy. Learn about tapering, the Fed's dual mandate, and why interest rates remain high. Explore the impact of AI spending on the market, and find out how recent jobs reports influence economic confidence. Understand the differences between producer and consumer indices, plus what current inflation stats reveal about our financial future.

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ANECDOTE

First FOMC Replay Sparks Questions

Jessie DeNuit watched her first FOMC press conference and replayed it many times to catch details.
Her curiosity drives questions that steer this episode's Fed deep-dive.

INSIGHT

Earnings Reveal Consumer Health

Corporate earnings have beaten expectations, with healthcare and technology leading, signaling corporate resilience.
Company commentary on consumer behavior offers real-time insight into pricing power and demand.

INSIGHT

Everyday Spending Shows Inflation Effects

Inflation shows up in everyday choices: consumers are price sensitive and shift behavior when menu prices rise.
Retail commentary (e.g., McDonald's, Starbucks) helps track where spending is softening.

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Come with us as we leap through the gallows and levitate down WallStreet. 🔮 Today we're discussing the most recent FOMC Press Conference led by the Hawkish Fed Chairman, Jerome Powell, and what it all means when he talks about the CPI & PCE Price Index. There's also a quick SMU (stock market update).

New Vocabulary Word: Tapering

Tapering is a monetary policy used by the Federal Reserve to phase out or reduce the number of assets purchased each month. Listen for more info.

Inflation Is Still Too High, When Are Interest Rates Getting Cut?

Remember in Episode 30 when we talked about how The Fed is projecting to cut rates 3 times this year (and how that's good for getting loans and lower CC interest rates, but bad for our HYSA)? Well now the Federal Reserve is not confident enough in the data to cut those interest rates just yet. They're being left at 5.25-5.5% (for the banks, but then we will still be seeing higher loan rates).

The Fed's Dual Mandate

Papa Powell stated that maximum employment and stable inflation at 2% is still the objective.

So what is inflation at right now?

CPI 3.5% YoY (reported in April, for March) Core is at 3.8% https://www.bls.gov/charts/consumer-price-index/consumer-price-index-by-category-line-chart.htm
PPI 2.8% YoY (reported in April, for March) Core is at 2.1%
https://www.bls.gov/charts/producer-price-index/final-demand-12-month-percent-change.htm

PCE 2.7% YoY (reported in April, for March) Next release May 31st Core is at 2.8% YoY https://www.bea.gov/news/2024/personal-income-and-outlays-march-2024

Low Unemployment Rates & Labor Demands

The Fed also said unempl

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