FAU REPORT: Consumers Face Elevated Prices Despite Waning Inflation
The years of high inflation appear to be over as inflation is now in line with the Federal Reserve’s target, though prices will likely remain permanently elevated, according to the Monthly Inflation Report produced by Florida Atlantic University’s College of Business.
The years of high inflation appear to be over as inflation is now in line with the Federal Reserve’s target, though prices will likely remain permanently elevated, according to the Monthly Inflation Report produced by Florida Atlantic University’s College of Business.
The Personal Consumption Expenditures Price Index (PCEPI), the Federal Reserve’s preferred measure of inflation, grew at a continuously compounding annual rate of 2.1% in September, up from 1.4% the prior month. Overall, PCEPI inflation has averaged 1.8% over the last three months and 2.1% over the last year.
“The good news is that the period of high inflation appears to be in the rearview mirror. The bad news is that prices remain permanently elevated,” said William J. Luther, Ph.D., associate professor of economics in FAU’s College of Business. “The PCEPI is about nine percentage points higher today than it would have been had inflation averaged 2% since January 2020. This unexpected burst of inflation transferred wealth from savers and employees to borrowers and employers.”
Core inflation, which excludes volatile food and energy prices, remains elevated. Core PCEPI grew at a continuously compounding annual rate of 3% in September. It has averaged 2.3% over the last three months and 2.6% over the last year. High core inflation is partly due to housing services prices, which grew at a continuously compounding annual rate of 3.8% in September.
“If the Fed were committed to price stability, it would have helped bring prices back down to a level consistent with pre-pandemic inflation,” Luther said.
Fed officials have projected another 25 basis points worth of rate cuts this year, a much smaller change than is required to return the policy rate to neutral. Since the data shows inflation is back on track, Luther says they should move more quickly.
“As it stands, Federal Open Market Committee members intend to take some time reducing the policy rate to neutral, with policy likely to return to neutral sometime in 2026,” Luther said. “They might move more quickly if the economy shows signs of contraction or reduce the pace of rate cuts if they become concerned that inflation will pick back up.”
-FAU-
Latest Research
- Hari Kalva, Ph.D., Inducted into the Florida Inventors Hall of FameWith 73 U.S. patents to his name, FAU engineering's Hari Kalva, Ph.D., a pioneering innovator in video technology, is one of 10 inventors selected for the 2025 class of the Florida Inventors Hall of Fame.
- Study: Supply Chain Plasticity and Firm Adaptation to Tariffs, RiskAs tariffs create economic uncertainty for firms and consumers , supply chain plasticity could be the key to helping firms navigate the trade environment, according to researchers at FAU and two other schools.
- Cyberbullying in Any Form Can Be Traumatizing for KidsA national FAU study finds even subtle online bullying - like exclusion from group chats - is linked to PTSD symptoms, suggesting that cyberbullying should be classified as an adverse childhood experience.
- 'Loop'hole: HIV-1 Hijacks Human Immune Cells Using Circular RNAsFAU researchers have identified a never-before-seen mechanism that enables HIV-1 to evade the body's natural defenses and use it to support its survival and replication.
- Twist of Light: New Tool May Unlock Gravity, Quantum Mechanics LinkFAU physicists and collaborators have tackled one of science's biggest mysteries - how the universe works - and they believe light may hold the key.
- FAU CARD Releases Free Water Safety Guide for Children with AutismDrowning is the top cause of unintentional death for children aged 1 to 4 in Florida, and autism increases the risk. FAU's CARD is offering a free guide to help protect children with autism from drowning.