Fed's Sticky-Price Inflation Measure Predicts Slow Return to Target

The Federal Reserve's preferred inflation measure, the personal consumption expenditures price index (PCE), came in at an annual rate of 3.7% in June, down from 4.1% in May.

This reading is based on data from a time when oil and gasoline prices were trending lower, but it's not the only inflation measure being watched.

The Federal Reserve Bank of Atlanta's sticky-price consumer price index (CPI) predicts inflation two years or longer ahead. At 2.8%, this rate suggests that it may take some time for inflation to reach the Fed's target of 2%.

Olu Sonola, head of U.S. Economics at Fitch Ratings, noted that housing prices, costs of eating out, and recreational activities are among the biggest components of the sticky-price index. These tend to be 'sticky' because they take time to adjust and unwind.