Latest / The Macro Memo with Fexingo: Daily Conversations on Inflation, GDP, and Federal Reserve Policy
The Growing Gap Between Core CPI and Core PCE
In this episode of The Macro Memo, Lucas and Luna dig into the widening divergence between core CPI and core PCE inflation. Core CPI hit 336.1 in May, up 3.4% year-over-year, while core PCE sits at 130.1 with a 2.8% annual rate. Lucas explains why the Fed focuses on PCE — it accounts for substitution effects and covers more goods — and why the gap matters for rate expectations. They discuss what the data means for the Fed's next move as the effective fed funds rate holds at 3.63% and the 10-year breakeven inflation dips to 2.20%. A tight episode for anyone tracking the real inflation…
The skinny
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