MNI: Fed Says Progress On Inflation Remains 'Bumpy'
MNI (WASHINGTON) - U.S. inflation has been coming down but the path lower has not been a straight line and services inflation outside of housing has stabilized at levels that are still too high, the Federal Reserve's semi-annual Monetary Policy Report to Congress said Friday.
"Progress on disinflation last year was bumpy, with both total PCE prices and core PCE prices—which exclude often-volatile food and energy prices and are generally considered a better guide to the future of inflation—showing firmer monthly price increases over the first quarter of last year and more moderate price gains thereafter," the report said.
"Core nonhousing services price inflation has flattened out at a somewhat elevated level," the report added. Measures of long-term inflation expectations are stable, with short-term views of inflation moving lower over the course of 2024, the central bank said.
"Financial conditions continue to appear to be somewhat restrictive on balance," the Fed said, adding that most monetary policy rules "call for levels of the federal funds rate that are within the current target range."
STRONG JOBS
The Fed report also touted robust employment conditions. "The labor market remains in solid shape. At the end of the year, the unemployment rate was low relative to historical experience, the labor force participation rate among workers aged 25 to 54 remained above its high from the years just before the pandemic, and job vacancies were at a strong level," the Fed said.
Fed Chair Jerome Powell will testify before the House and Senate next week, facing questions about the likely impact of U.S. President Donald Trump's rapid shift in economic policies, including tariffs, immigration restrictions, and tax cuts.
FOMC members have indicated in recent public remarks that they are in no hurry to cut interest rates further after keeping them on hold last week, and need to see more evidence of inflation progress before resuming monetary easing. (See MNI INTERVIEW: Fed Likely On Hold For Most Of 2025-Krosnzer)