{"text":[[{"start":8.9,"text":"The US Federal Reserve’s preferred inflation measure is set for an overhaul that will ease some of the pressure on policymakers to quickly raise interest rates as they debate how to tame a burst of higher prices."}],[{"start":21.950000000000003,"text":"As Fed officials meet to set borrowing costs this week, the Bureau of Economic Analysis is reworking how it calculates price rises in some parts of the economy, in a move that is expected to lower recent readings of personal consumption expenditures inflation."}],[{"start":36.25,"text":"Policymakers have been split over how to counter a jump in inflation spurred by the Iran war, tariffs and the AI boom. Headline PCE hit a three-year high of 4.1 per cent in May, while the core measure rose to 3.4 per cent, both well above the central bank’s 2 per cent target. "}],[{"start":55.25,"text":"Economists expect the reworked PCE methodology to lower its core inflation reading by about 0.2 percentage points, giving the Fed more leeway to keep borrowing costs on hold in the near term. "}],[{"start":66.9,"text":"“The fact that it moves inflation closer to the Fed’s goal should make it easier for them not to hike rates,” said Alan Detmeister, an economist at UBS and former Fed inflation researcher. "}],[{"start":78.7,"text":"Krishna Guha, a former New York Fed official who is now head of economics at Evercore ISI, said “provided the market views the new series as credible” any drop in PCE readings would make it “slightly easier for [Fed chair Kevin] Warsh to avoid rate hikes”."}],[{"start":95.85,"text":"The statistical revamp comes as Fed officials spar over whether and when borrowing costs should be raised to combat inflation. At least two members of the rate-setting Federal Open Market Committee indicated they could vote in favour of a rise as soon as this week. "}],[{"start":111.44999999999999,"text":"It also comes as President Donald Trump has put intense political pressure on the central bank to lower rates, which sit in a range of 3.5 per cent to 3.75 per cent. "}],[{"start":123.54999999999998,"text":"The president this week said while he believed Warsh “wants to do the right thing” on interest rates, the Fed chair was constrained by “very political” board members who “perhaps have bad intentions”."}],[{"start":135.6,"text":"The BEA methodology update, which takes effect from September, will affect data on portfolio management fees, computer software and accessories, and legal services going back to 2021. "}],[{"start":147.95,"text":"Critics say the change, while part of a regular BEA modification process, is skewed towards categories that are driving inflation and risks diluting readings at a time when monetary policy is under the political spotlight."}],[{"start":162.25,"text":"“They really haven’t made a good rationale for why they are changing these specific series,” Detmeister said. “The ones they’ve chosen do seem to have some political element to it.”"}],[{"start":173.75,"text":"Two of the categories of price inputs being revised — computer software and accessories, and portfolio management — are among the top five drivers of inflation."}],[{"start":184.9,"text":"Omair Sharif at Inflation Insights said that while there were “sound arguments for the changes . . . it doesn’t look good optically” to be lowering a series of categories so closely associated with higher inflation all at once."}],[{"start":200.70000000000002,"text":"Some economists have complained the BEA has not provided sufficient information on how the changes will work, leaving analysts struggling to assess what they mean for inflation readings. "}],[{"start":210.75000000000003,"text":"The BEA said the annual updates were “made by BEA career staff to maintain the accuracy and reliability of BEA’s estimates” and designed to provide improvements to how prices are assessed. "}],[{"start":222.90000000000003,"text":"The changes will bring PCE closer in line with the consumer price index inflation gauge, a narrower measure of price pressures facing Americans."}],[{"start":231.40000000000003,"text":"PCE portfolio management measures have surged in recent months as a result of bullish stock markets, while the legal services reading has relied on unpublished and often erratic proxy data. "}],[{"start":242.25000000000003,"text":"A recent paper co-authored by former Fed governor Stephen Miran found there was a “mismatch” in how software prices were measured, following an unprecedented surge in the category in previous months."}],[{"start":253.75000000000003,"text":"Michael Pearce, chief US economist at Oxford Economics, said there was nothing in the BEA’s update that “seems untoward” and that any effort to improve how inflation is measured should be broadly welcomed. "}],[{"start":266.35,"text":"“I struggle to see where the fault lies in terms of making these improvements,” he said. “It should give us more confidence in the statistics that they are regularly revised to incorporate these improvements and better data sources.”"}],[{"start":280.05,"text":"While PCE inflation is expected to drop in June when data is released on Thursday, it looks set to remain well above the Fed’s target. Any impact that the BEA’s revisions have on the central bank’s near-term decision-making is expected to be marginal in the long term as factors including the AI buildout continue to drive underlying inflation higher."}],[{"start":300.25,"text":"“I don’t think it changes the pathway here,” said Robert Sockin, chief US economist at asset manager PGIM. “As long as core PCE stays above 3 per cent all year, which is what’s in our forecast, I think they hike.”"}],[{"start":324,"text":""}]],"url":"https://audio.ftcn.net.cn/album/a_1785323052_1130.mp3"}