The co-hosts of “CNN This Morning” reacted with surprise Friday when confronted by particularly bad inflation numbers.
“All right, just in, a key consumer spending report just released. It is the Fed’s preferred gauge of inflation,” co-host Poppy Harlow said, kicking off the segment.
CNN chief business correspondent Christine Romans then let out an audible sigh, prompting co-host Don Lemon to ask, “Oh my gosh, what is that sigh for?”
Romans then sighed once more before explaining herself.
“Well, 5.4 percent was the inflation gauge on this PCE index. And that’s hotter than we had expected. And it’s the first time we’ve seen it tick up in quite a few months here. So, overall inflation, 5.4 percent. Still far away from the Fed’s desired 2 percent,” she said, prompting Lemon to utter an audible “oof.”
“You see that little uptick,” she continued, pointing to a chart. “I just don’t like that. I liked the curve. I liked the idea that we were peaking. And, by the way, futures don’t like it either. The stock market and futures are down.”
PCE is short for the personal consumption expenditures index. It “reflects changes in the prices of goods and services purchased by consumers in the United States,” according to the Bureau of Economic Analysis.
Last month PCE went up, which isn’t good news, as it means the American people are spending more for their goods and services than they should be spending.
It’s especially bad news because PCE had previously been dropping, up until something happened last month that brought it back up again.
“Month to month, you would see inflation rose 0.6 percent month to month. We expected 0.4 percent. That compares with only 0.2 percent last month. So, as you know, the trend is what’s important. This is just one month. But the trend here, this sort of broke the trend that we had seen peaking inflation,” Romans said.
So to recap, after having been at just 0.2 percent last month, PCE skyrocketed to close to 0.6 percent this month, which raises the question of whether it’ll keep going up.
Romans argued that this movement doesn’t signify an uptrend quite yet.
“It’s just one kind of icky [inaudible],” Romans said, saying in effect that this move is — for the time being — just an anomaly.
Albeit a really bad anomaly that the Federal Reserve did not want to have to encounter.
Continuing the discussion, Harlow then asked Romans about remarks JP Morgan Chase boss Jamie Dimon recently made about inflation.
“[He] said yesterday on CNBC, I have all the respect for Powell, the Fed chair, but then he said, we lost a little bit of control of inflation. Does that worry you to hear someone like Jamie Dimon think [that]?” she said.
“Well, Jamie Dimon is — his business is to be worried about bad things that are going to happen, right? And you remember he talked about a hurricane was coming way earlier last year and he’s been worried about a recession for some time,” Romans replied.
“I think that that has been the risk and the concern broadly, even inside the Fed, that inflation, once it gets out of control, it is really hard to get it back in the bottle. That’s why the Fed has raised interest rates so many times so quickly and by so much, they’re trying to get this under control,” she added.
Kind of. Many critics argue that the Fed should have raised interest rates earlier and faster.
JPMorgan CEO Jamie Dimon says the Fed should have raised rates sooner https://t.co/OC6jyWOA3H pic.twitter.com/c1S7OlCbLc
— Bloomberg TV (@BloombergTV) May 4, 2022
Powell is clueless he‘s a lawyer not an economist. The Fed should have raised rates in 2021 but Powell kept saying inflation was transitory when it actually was raging. Now with rates still at zero the Fed has no ammo left to save stocks or the economy and thus we‘re in a hole.
— Will Meade (@realwillmeade) January 26, 2022
The CNN discussion concluded with Collins asking why the Federal Reserve is specifically interested in 2 percent PCE.
“Two percent is the goal internally. A lot of central banks use as their goal. That’s where inflation is healthy. A little bit of price increases are healthy in an economy. Deflation is not. So, a little bit of inflation. And you want to have a strong job market. We still have a very strong job market. That spins off more inflation, by the way, and higher wages,” Romans replied.
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