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What the Feds Preferred Inflation Gauge Misses About Services
Season 2
Episode 79
Published 1 week, 6 days ago
Description
Episode 79 of The Federal Reserve Podcast with Fexingo breaks down the May 2026 core PCE reading of 3.4% — the highest since October 2023. Lucas and Luna examine why the Fed's preferred inflation gauge continues to understate services inflation, focusing on the narrow basket of imputed prices and lagging rent adjustments. They discuss how owner's equivalent rent and medical services skew the metric, and what that means for the FOMC's rate path. With the fed funds rate at 3.63% and the ten-year breakeven inflation rate falling to 2.20%, the hosts ask whether markets are misreading the persistence of services inflation. A concrete look at one number and the structural gap in how the Fed measures prices.