“The fact that the Fed’s PCE index is showing inflationary pressure is significant, since it is essentially designed to lowball price increases. The CPI gives a 31 percent weighting to shelter costs and a 17 percent weighting to transportation (read as rent and gasoline), which the PCE basically cuts in half. By reducing the volatility of its preferred inflation gauge, the Fed essentially gives itself the leeway to maintain a looser policy longer.  But the fact that the PCE is on the rise leaves the Fed in a conundrum, having said for years now that it would act when inflation reaches an annualized 2 percent, a level that is fast approaching.”

http://www.investingdaily.com/20619/the-feds-dreaded-dilemma-a-weak-economy-plus-inflation-2/

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