The Fed's Favorite Measure Of Inflation Is On The Rise

Inflation has been pretty subdued since the financial crisis. This has given the Federal Reserve a lot of room to be loose and easy with monetary policy.

However, inflation has definitely been picking up lately.

The Fed's favorite measure of inflation is the PCE price index, which was updated with today's April personal income and spending report.

According to the report, The PCE index climbed 1.6% year-over-year, while core PCE - excludes food and energy - increased by 1.4%. This is a notable acceleration from the 1.1% and 1.2%, respectively, we saw in March.

"Inflation? Yes indeed, there is some," said Bank of Tokyo Mitsubishi's Chris Rupkey. "If inflation is climbing closer to the Fed's 2% target, then that can only mean one thing: normal interest rates are out there on the horizon and you don't need a pair of binoculars to see it coming."

Here's the chart from Advisor Perspectives' Doug Short.