Inflation trend
Updated
What it is
This state variable tracks the trajectory of U.S. inflation using the two main gauges followed by markets and the Federal Reserve: the Consumer Price Index (CPI) and the Personal Consumption Expenditures (PCE) price index, with the Fed's own 2% target referencing core PCE. The "trend" matters more than any single month's reading, since the Fed sets policy based on whether inflation is moving toward or away from target over time. Elevated or re-accelerating inflation raises the odds of tighter monetary policy and higher interest rates.
Why it matters lately
As of August 2026, core PCE inflation stood at about 3.0% year-over-year and core CPI at about 2.5%, both still above the Fed's 2% target, showing some moderation from June 2026 readings of roughly 3.3% core PCE and 2.6% core CPI. Against this backdrop, the Federal Reserve raised its target rate by 25bp to 3.75%-4.00% on September 16, 2026 — its first hike since 2023 — with Chair Kevin Warsh citing persistently high inflation, and the Fed's accompanying projections put total PCE inflation at 3.7% for 2026, easing to 2.3% in 2027.
Asymmetric Analytics view
Inference (AA): AA tracks the inflation trend as a core state variable because it directly shapes Fed policy, real yields, and the valuation backdrop for other assets and indicators in the graph.