Let’s discuss the Fed’s preferred measure of inflation and gasoline.
PCE Year-Over-Year Inflation Details
- PCE: 3.7 percent, bottomed at 2.3 percent in September 2024
- PCE Goods: 3.7 percent, bottomed at -1.2 percent in September 2024
- PCE Services: 3.7 percent, bottomed at 3.4 percent in October 2025
- PCE Core: 3.3 percent, bottomed at 2.6 percent in April of 2025
I resolved the 4-way tie on the services bottom by calculating to three decimal places. PCE Services bottomed at 3.357 percent in October 2025
The “hot side” in the title is vs expectations. The Econoday consensus was 0.1 percent month-over-month and 2.6 percent year-over-year.
Actual data was higher.
Is 3.3 percent the new 2.0 percent? Given the wait-and-see cheerleading, it would see so.
PCE Month-Over-Month
The BEA’s Price Details shows PCE inflation at 0.2 percent with goods at -0.11 percent
I calculate 0.16 percent to two decimal places, a bit better, but the reported goods inflation is suspect.
The BEA says the price of gasoline decline 2.7 percent in July following a 9.2 percent decline in June.
What Really Happened
If we look at the unadjusted pump prices from AAA Fuel Prices reports, gas prices did not experience a deep enough drop in early July to naturally offset the late-month surge:
- July 2: $3.83
- July 16: $3.94
- July 23: $4.09
- July 30: $4.09
The raw, unadjusted average of those weekly data points, July’s average price is roughly $3.98.
Compare that to June 2026, where the national average had crashed heavily from its $4.30 peak down to the $3.80s. June’s raw monthly average was roughly $3.96.
In terms of pure, unadjusted cash out of your wallet, gasoline actually rose by about 0.5% in July.
Question of the Day
Q: How does a +0.5% actual increase turn into a -2.7% decline?
A: It is entirely due to the Bureau of Labor Statistics’ (BLS) seasonal adjustment algorithm which the BEA also uses.
Most consumers don’t believe the price of gasoline fell 2.7 percent in July and neither do I.
PCE and CPI Inflation Details
CPI and PCE Inflation Year-Over-Year
- CPI: 3.4 percent
- CPI Core: 2.5 percent
- PCE: 3.7 percent
- PCE Core: 3.4 percent
PCE Above Fed’s Target
If you are a Trump or Fed apologist you are watching core CPI at a still high 2.5 percent and making excuses.
However, the PCE is the Fed’s preferred measure of inflation.
Year-over-Year PCE inflation has been over the Fed’s 2.0 percent target for 65 straight months since March 2021.
The Fed Will Get the Blame
No matter what happens now, the Fed is going to get the blame.
If the Fed hikes (as it should have long ago), and the stock market or economy tanks, the Fed will get the blame.
But an obvious AI bubble is brewing, and the Fed ignored that. It ignored the huge surge in credit fueling AI. And the Fed ignores off-balance sheet accounting that hides this debt and inflates earnings.
If the Fed does nothing, the bubble will keep brewing but will eventually pop. The Fed will get the blame for that too.
Meanwhile, the Fed, Fed apologists, and Trump apologists keep pretending everything is under control.
The Trump apologists want the Fed to cut rates. That’s ridiculous for two reasons, inflation and credit bubbles.
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Carney has a huge card, two if he chooses to play them.
August 25, 2026: Canada Retaliates and Trump Threatens to Rename Lake Ontario
Trump makes a threat he cannot even keep.
Trade wars do neither side any good. We have them because someone starts a trade war, Trump in this instance, and political necessity demand retaliation.
An overwhelming percentage of Canadians wants Carney to respond. So he did.
It is absurd to be in this spot, but here we are.
August 26, 2026: Americans Now Pay 75 Percent More for Aluminum than the Rest of the World
You can’t increase exports if you are the highest cost manufacturer.
Tariffs increase costs. Both the US and Canada are doing this.
“Actual data was higher.”
No. Actual data were higher.
Data is the plural while datum is the singular.
History books will be written about how careless this Fed and regulators were with the Dotcom bubble 2.0 we’re living in right now. The exact same bad behavior as last time with just as little restraint, the only difference is that this time it is far, far bigger of a bubble coming to a head at a far worse time.
I think it’s a good question how exactly we managed to learn so little from the dotcom bust that we are here a mere 25 years later.
Nobody went to prison that time, either.
Prison? for the ruling class of assholes? bwaahhhhhh. thanks for the LOL. the amerikan empire rewards asshole behaviour. has for a very long time. democracy truly works. assholes elect assholes to do asshole things. bombs away. with the uniparty.
Probably exactly why it’s happening again and we have an international pedophile cabal to boot. The buck never stopped anywhere so now it’s gigantic and rolling right towards us. Everyone who thinks this will never change and will somehow sustain itself needs their heads checked,l. Rule one of business: you can’t cook the books forever.
To my way of thinking, the fed is out of the picture as far as making things better, but they could easily make things worse with lower rates. QE and bailouts. This problem is deficit spending and continuing to deficit spend will not make things better. Therefore, the ball is in congress’ court to cut spending below revenue and start to pay down the debt. Everything else is just gimmicks kicking the can down the road; if they worked things would be getting better not worse. The last 50 years prove deficit spending does not work on a permanent basis.
Cutting means Trump cannot have a trillion and a half dollars for his military toys, CMS needs to be made competitive, the federal government cannot be looked upon to solve every problem and it means the federal government needs to get out of businesses it is not authorized to be in like education and space. Yep, it sucks, but not doing the cuts now will be much more painful later especially if ruthless participants market makes all the decisions.
If we can’t even manage to provide the things other governments easily do, we might as well just go the full way and declare bankruptcy like the third world dump we seem to have become.
Declaring bankruptcy does not fix anything, congress will still continue to spend more than it receives and we eventually return to the situation we are in currently. We can’t provide the things other governments easily do because we cannot locally source the inputs nor can we locally manufacture competitively much of what we consume. The tax base to provide those things is contracting.
Probably because we let Epstein and his pals dodge taxes left right and center both personally and with their companies. This is a robber’s economy and the path leads to ruin and heavy reform. Cut off education and healthcare much more and heads will literally roll before long.
PCE higher than Fed funds rate. Money for nothing and the chicks are free.
Screwed up for 21 straight months all on the high side. The EXPERTS at the Fed really know what they are doing.
If you look at real interest rates defined as the nominal effective Fed Funds rate minus the trailing YoY PCE inflation rate, for the period from Jun 2023 through Jun 2025, the real interest rate bounced around in the range of +1.8% to +2.2%, with spikes over 3%. However, that changed one year ago in Aug 2025, with real rates falling to the 1% range, and then another fall in Mar of this year. The last few months have been +0.24%, -0.16%, -0.47%, -0.07%, and -0.07%. To me, this seems like the start of a long era of financial repression. While the Fed will continue to mumble about a 2% inflation target, I suspect that in reality the Fed goal going forward now will be to keep real interest rates very close to zero or even somewhat negative. It may actually be easier for them to do this if inflation runs “hot” in the range of 3-4% rather than returns to 2%.
Well everyone needs to understand that this is the “suckers and losers” CPE numbers which should now be referred to as S&L CPE™. And if the S&L numbers are hot then the real numbers must be red hot. Let me guess, the Fed won’t do a damn thing and inflation will spike out of control by the end of the year.
Do worry, Trump, Walrus, GOP, and democrats will find a way to make things even worse.™
If inflation truly spikes out of control by year end you’ll get your crash long before 2032.
Do worry, Trump, Walrus, GOP, and democrats will find a way to make things even worse.™
I’m waiting for the Fed to hike rates one single atom, thus crashing the fake stock market circus we see today.
Money keeps flowing into stocks via 401Ks and pension plans. It’s automatic and immune to interest rate hikes.
Not saying some investors won’t change into bonds if rates hike by a lot (2% type thing), just saying stocks are artificially propped up by contributions that didn’t do that a generation ago (90s and earlier).