The Fed watches the price index for Personal Consumption (PCE) quite intensively.

For the calendar year 2022 the PCE rose by 5.3%. That was down from 2021, but still well above the Fed's preferred 2%

For the calendar year 2023 the PCE rose by 2.6%. Almost 40% of that 2.6% (or a full 1% rise in the PCE) occurred in the first quarter of 2023.

For the final three quarters of 2023, PCE inflation chugged along at ... 2.13%

"Core" PCE inflation was a bit higher, because that excludes "volatile" food and energy prices. But people do eat food and consume energy and their prices were declining for much of the year. For the last nine months of 2023 energy prices rose by a gigantic ... nothing. Food prices over the last nine months rose by a whopping .8%. That's .8, not 8.

Rent is a lagging indicator. Rents were still rising in 2023, but are likely to stabilize or even decline in 2024.

I think the only question now, barring very nasty black swan events (WWIII, for instance), is whether the Fed will begin easing interest rates in March (less likely) or May (very likely).

Either way, that latter half of 2024 should be one of easing (not crashing) interest rates. That should be very good for consumer purchasing power, business investment, and the stock market.

If this comes to pass, we will have achieved the soft landing with historically strong growth and low unemployment. Not the worst economic environment for an incumbent president to tout as the campaign builds into fall.

Just sayin' ...

Here is all the data, BTW ...


Bureau of Economic Analysis PCE data

I agree, the "soft landing" that was presumed to be essentially impossible to achieve appears to have happened. People (raises own hand) are impatient to see the impacts of the lower inflation on real life issues, such as mortgage rates.

But I also wonder if prices will actually decline. Our grocery prices here have increased dramatically over the last 9 months or so and the cynic in me says that once you've started charging $16.99/lb for smoked turkey, you're not going back. Same with utility rates.

So I feel like the only pain points that are likely to be helped might be mortgage rates and potentially housing availability.

Or maybe I'm just in a bad mood.

Slowing inflation is a good thing, but deflation is not something to necessarily be desired. However, there is a tendency to remember when particular items were cheaper not so long ago and that nostalgic memory has an outside impact. We became accustomed to low inflation over quite a few years and the sudden price jumps in the past couple of years have been a jolt that is not likely to be forgotten for awhile.

Big Al

True, deflation is a real problem. And I would not expect to see deflation on the horizon. All the signs point to a continuing disinflation back to roughly what the Fed wants (2%). There will likely be some price decreases in certain categories over the next year, and these may be politically important. Things like rents should stabilize, and maybe drop a bit, especially in areas where housing supply rises either because of new construction or office space conversion. Part of the rent spike is due to rising interest rates pushing people into the rental market. That should abate.