In October, inflation increased but remains relatively stable. The Personal Consumption Expenditures Price Index (PCEPI) grew at a 2.9 percent annual rate in October 2024, with core PCEPI inflation at 3.3 percent. Supply constraints from events like hurricanes and strikes contributed to the rise in prices.
Contrary to claims of post-pandemic inflation being supply-driven, macro spending data suggests demand played a larger role. A counterfactual forecast shows that if nominal spending had remained stable, inflation would have been lower. The excess inflation observed post-pandemic is largely attributed to demand-driven factors.
While the recent inflation uptick could potentially be demand-driven, tight monetary policy suggests otherwise. Monitoring how inflation rates fluctuate as supply conditions improve will provide more insight. The current view favors supply-driven factors contributing to inflation, but time will tell.
Source link
