Core PCE Inflation Falls To Second-Lowest Level Ever

Core personal consumption expenditure (PCE) data in today’s GDP release showed that inflation fell to 0.8% in the second quarter of 2013 from an upward-revised 1.4% in the first quarter.

The lowest level on record for Core PCE inflation is 0.7%. That was in the first quarter of 2009, in the fallout of the financial crisis and the ensuing recession. Core PCE also touched 0.7% twice in the early 1960s, which is about as far back as the data go.

Core PCE also hit 0.8% in the fourth quarter of 2010, but rebounded after that to 2.3% in the second quarter of 2011. Since then, it’s been trending down.

This measure of inflation is closely watched by the Federal Reserve, and it could lend credence to the argument that the Fed remain accommodative for longer. The central bank has said it will not raise short-term interest rates before inflation hits 2.5% and unemployment falls to 6.5%.

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