New York Fed's Inflation Gauge Holds Steady At Over 2-Year Low: Is Threat In Rearview Mirror?

In a reassuring sign for investors and policymakers, a key inflation gauge measured by the Federal Reserve Bank of New York revealed that the Multivariate Core Trend (MCT) inflation rate was 2.8% in July, holding steady at from a downwardly revised level in June.

This figure was the lowest level since January 2021, further indicating that COVID-19 pandemic-related price pressures are fading.

Breaking Down the Numbers

Housing accounted for 0.4 percentage point (ppt) of the increase in the MCT relative to its pre-pandemic average, while services ex-housing accounted for 0.48 ppt. Core goods had a slightly negative contribution of -0.02 ppt.

The New York Fed’s dynamic factor model analyzes monthly data for major sectors, shedding light on inflation persistence and its breadth. This information helps identify trends and sectors driving inflation.

A reduced rate in this measure may signify potential relief from inflationary pressures, influencing monetary policy and the broader economy.

Read Also: The Latest on Inflation Trends

The MCT model’s ability to remove transitory variations from core sectoral inflation rates has become pivotal, particularly during the pandemic’s impact on core sectors like motor vehicles and furniture.

Nick Timiraos, the chief economics correspondent at The Wall Street Journal, emphasized the significance of this inflation gauge on X.

Now Read: Why Is The US Dollar On Fire Despite Fed’s Steady Interest Rate Signals?

This content was partially produced with the help of AI tools and was reviewed and published by Benzinga editors.

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