We have the final piece on inflation for January: lower inflation than other measures.
Posted on February 28, 2025

January inflation for the measure the Federal Reserve favors was issued this morning. Since inflation is a hot topic in the news, I show the January data for three inflation measures: seasonally adjusted inflation, core inflation (excludes food and energy), and personal consumption expenditures (PCE) less food and energy, the measure issued today. January inflation for PCE was greater than December but lower than January a year ago. 12-month inflation declined from 2.9% to 2.7%. The six-month rate for PCE inflation aims at 2.6% annual rate. This is about one percentage point lower than the other two measures.

Details:

The first two graphs are from data for January issued earlier in February and displayed in this blog.

Seasonally-adjusted inflation has increased steadily in the last seven months. This is the most widely reported measure of inflation.

Steady increases in inflation for the last seven months. The January rate was at ~5.5% annual rate.

Core inflation excludes volatile energy and food components. This is similar to the measure favored by the Federal Reserve. The last six months run average to 3.6% annual rate. January inflation was higher than the high inflation in January 2024.

Inflation in January was highest and at ~5.5% annual rate.

Personal Consumption Expenditures (PCE) excluding Food and Energy is the measure of inflation that the Federal Reserve Board favors. This measure is a chain-type index: the weights of the components of the index change with estimates of changes in buying patterns. The increase for January was less than the increase for the other two and much less than in January 2024. The 12-month rate is 2.7%. The last six months aim at an annual rate of 2.6%, roughly one percentage point lower than the other two measures.

Inflation in January was much lower than in January 2024 and lower than the other two measures. January’s rate is at about 3.5% annual rate.

Conclusion: The federal reserve’s favorite measure of inflation was issued this morning. Inflation increased from December. The six-month rate aims at 2.6% annual rate, and that is nearly one percentage point less than two other, more popular measures of inflation.

We have the final piece on inflation for January: lower inflation than other measures. Posted on February 28, 2025