Inflation Concerns and Fed's Focus on PCE Inflation

The podcast discusses the Federal Reserve's focus on Personal Consumption Expenditures (PCE) inflation as opposed to Consumer Price Index (CPI) inflation. While the CPI is showing signs of easing and aligning with PCE inflation, the Fed remains cautious and wants to ensure sustained inflation below its 2% target. They are closely monitoring factors such as home prices, used car prices, and wage increases, which could have an impact on inflation. The Fed believes that stable inflation is consistent with wages rising at a pace of around 3.5%. Overall, the Fed's focus on PCE inflation and their desire for more data before making any decisions on rate cuts is driven by the need for sustained inflation at or below their target.