Inflation is already at target, if you squint

Disinflation has arrived, but its precise velocity depends on which statistical lens an analyst chooses to apply. The October core Personal Consumption Expenditures (PCE) price index printed at 3.5 per cent year-on-year, a level still uncomfortably above the Fed’s statutory mandate. Yet annualized over a rolling six-month window, core inflation has slowed to 2.5 per cent; on a three-month basis, it has dropped to 2.0 per cent.

The Annualisation Illusion

Depending on your endpoint selection, inflation has either been fully subdued or remains stubbornly elevated. The Federal Reserve, scarred by premature declarations of victory in 2021, cannot afford to trade on short-term three-month annualised figures that can be easily distorted by anomalous seasonal shifts. The institutional reaction function demands sustained, multi-quarter verification before declaring the inflation crisis resolved.

While three-month annualized inflation metrics allow Wall Street to celebrate victory, central bankers must anchor policy to durable trends rather than ephemeral statistical snapshots.