Inflation, income, & spending/Hammack gives us her reasoning for dissent

The PCE November inflation rate rose one tenth for headline and core with both one tenth below expectations but typically always comes around expectations vs CPI where there could be more deviations. AGAIN, the biggest component of PCE is healthcare and paid for by 3rd party payers like Medicare, Medicaid and employer paid insurance companies as opposed to out of pocket medical expenses measured in CPI.

The headline gains were 2.4% and 2.8% for headline and core vs 2.3% and 2.8% in the month before. Energy prices rose .2% m/o/m but fell 4% y/o/y while food was also up .2% m/o/m and 1.4% y/o/y. Goods deflation continued, lower by .4% y/o/y, offset by services inflation of 3.8%.

Bottom line, because the Fed pays more attention to PCE than CPI and with the 50 bps difference between the core rate on each with the former about the latter, the Fed can theoretically cut 50 bps more than they would if the PCE didn’t exist as a calculation.