‘Supercore’ inflation measure shows Fed may have a real problem

US Federal Reserve Chair Jerome Powell attended a “Fed Listens” event in Washington, DC, on October 4, 2019. A recent consumer price index reading caused a stir in markets, with particular attention paid to the supercore inflation reading, which excludes shelter and rent costs. The supercore inflation rate accelerated to 4.8% year-over-year in March, the highest in 11 months. Some economists are concerned about the elevated housing inflation but believe it is a temporary issue.
The data pressured equities and sent Treasury yields higher on Wednesday, leading futures market traders to push back expectations for the central bank’s first rate cut to September from June. There is a growing concern about the rising supercore inflation and its impact on the market. Despite efforts to combat inflation, some economists believe that rate hikes may be necessary in the future if inflation continues to rise above the 2% target.

US Federal Reserve Chair Jerome Powell attended a “Fed Listens” event in Washington, DC, where he discussed the economy. Supercore inflation, a specific prices gauge within the consumer price index, has been on the rise, reaching a 4.8% pace year over year in March. This measure excludes shelter and rent costs, providing a clearer picture of underlying prices. Despite the Federal Reserve’s 2% inflation goal, supercore inflation has been far above this mark, causing concern among economists. The Fed may need to consider rate hikes to combat this high inflation, which has been driven by household necessities like car and housing insurance. The central bank is facing a tough decision on whether to hike interest rates further to bring down inflation.

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