By David Kotok

“The Committee judges that inflation at the rate of 2 percent, as measured by the annual change in the price index for personal consumption expenditures, is most consistent over the longer run with the Federal Reserve’s statutory mandate.”  Board of Governors of the Federal Reserve System, January 25, 2012

For many years, the Fed has been discussing “core” PCE on an informal basis.    Fed policy has changed.  Headline PCE is now the defined target.

Jim Bianco clarified the issue.  He noted that Bernanke affirmed it at his press conference by saying, “headline PCE not core PCE.”  To get this “iced” Jim submitted a direct request for clarification.  The Fed answered: “As he noted in his news conference, this is not hitting 2% on a minute-by-minute basis, but over a ‘medium term’ concept.”

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