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A closer look at the Fed’s favourite inflation gauge

The resilience of PCE core services ex-housing inflation is only partly due to the strength of labour market conditions, and other factors are likely to play an important role in driving it lower over the rest of this year. That should reinforce the looming downward pressure on the labour-sensitive components from the easing in labour market conditions already underway, which we expect to gather pace as the economy slides towards recession.

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