The Lombard Review
Economy

Inflation's stall isn't a seasonal fluke

Persistence, not seasonality

A supermarket aisle in Vermont
A supermarket aisle in VermontPhoto: Tessa Bury / Wikimedia Commons, CC BY 4.0
1 min read Data: Feb core PCE 2.8%

Financial commentators spent the opening months of 2024 attributing sticky inflation prints to residual January seasonal noise and contract resetting quirks. That soothing thesis was shattered by the February core PCE price index, which advanced at an annualized rate of 2.8 per cent. Disinflation has not experienced a seasonal blip; it has stalled against a wall of structural persistence.

The north face of the Eccles Building, Washington
The north face of the Eccles Building, WashingtonPhoto: AgnosticPreachersKid / Wikimedia Commons, CC BY-SA 3.0

Persistence over Seasonality

Non-housing service costs and domestic wages continue to compound at rates incompatible with the Federal Reserve's two per cent mandate. With consumer spending remaining resilient and financial conditions extraordinarily loose, corporations retain sufficient pricing power to pass through input costs. The final leg of the inflation journey is proving to be a protracted siege rather than an immaculate retreat.

The White House from Lafayette Square
The White House from Lafayette SquarePhoto: DJTechYT / Wikimedia Commons, CC BY-SA 4.0

Attributing inflation persistence to seasonal adjustment noise was a convenient market delusion; price growth has stalled because aggregate demand remains insulated from monetary policy.