Summary
Inflation is still considerably higher than the central bank's 2% annual goal. Consumers are spending more than they're taking in, a situation neither sustainable nor disinflationary. The inflation problem in the U.S. today first emerged in 2022, and had multiple sources.
Core PCE services inflation excluding housing is running at a 5.6% annualized rate over the past three months. That's the highest outside of the Covid years since 2012 and a level generally associated with economic downturns, not expansions. Inflation expectations also are on the rise, with one- and five-year inflation expectations respectively at 3.2% and 3%.
