The Wall Street JournalThe Wall Street Journal

Why interest rates don’t cool inflation enough: They hit the wrong places

By Jon Sindreu

06 Jul 2023 · 3 min read

informed Summary

  1. Despite the steepest pace of rate increases since the 1980s, inflation has not been brought down to the official 2% target. The personal-consumption expenditures (PCE) index, closely monitored by the Federal Reserve, rose 3.8% in May relative to a year earlier, and inflation in the eurozone was 6.1%.

Interest rates might not hit inflation where it hurts most.

Consumer prices aren’t slowing fast enough. The personal-consumption expenditures, or PCE, index, which is closely monitored by the Fed, rose 3.8% in May relative to a year earlier. In the eurozone, inflation was 6.1%. Price growth is down from its peaks, but that seems to be driven more by a reversal in commodity prices than by a cooling economy.

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