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How the Fed Reads Inflation Data It Admits It Cant Forecast
Season 2
Episode 76
Published 2 weeks ago
Description
On June 25, 2026, the Fed's preferred inflation gauge — core PCE — hit 3.4 percent, the highest since October 2023. This came just weeks after the FOMC released new quarterly forecasts that projected core PCE ending 2026 at 2.5 percent. Lucas and Luna dig into the widening gap between what the Fed predicts and what the data actually shows. They look at the specific components driving sticky inflation: services ex-housing, portfolio management fees, and auto insurance. They also discuss why the Fed keeps missing to the upside, and what that means for the rate path through year-end. Anchored to the May PCE report released on June 25, this episode explores a concrete puzzle: if the Fed's models are wrong, what should they be watching instead?