The NYFed developed the multivariate Core Trend (MCT) model for PCE inflation to look at the persistence or trend of inflation components in the PCE. It tracks the PCE closely and explains why the Fed believed that inflation would not be persistent during 2022. The MCT numbers did not suggest that the components would persist. The PCE moved back to the longer-term MCT, yet the current data tells a story that the Fed is not winning the war on inflation. Inflation seems to be stuck just below the 3% level. By this measure, we are unlikely to see the Fed come close to the 2% target.
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