Inflation Problem Remains Unlicked

From the Wall Street Journal:

After being given up for dead, inflation is gradually coming back to life.

It’s not roaring back. Indeed, it’s still below the 2% level the Federal Reserve targets, one reason the Fed is almost certain to leave interest rates unchanged when it meets this week.

….The behavior of inflation-protected bonds suggests that in early July, investors expected U.S. inflation to average 1.4% over the coming decade. As of Friday, that had risen to 1.7%. That is still below the Fed’s 2% target, evidence that investors remain unconvinced the Fed has licked the low-inflation problem.

The “low-inflation” problem! That’s totally accurate, but did you imagine you’d ever see the Wall Street Journal discussing the problem of inflation being too damn low? For those of us of a certain age, it feels like an alternate universe.

Anyway, the primary inflation measure used by the Fed is the trimmed mean PCE rate. Here it is. It’s been going up steadily but very slowly for the past few years, but it’s still pretty low and there’s not even a hint of acceleration yet.