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The Federal Reserve raised interest rates on Wednesday, as expected.
The fed funds rate is now at its highest level since 2001 as the Fed attempts to bring inflation back to its 2% target.
Fed Chair Jay Powell held a pretty newsy press conference on Wednesday, telling the assembled media the Fed is not planning to raise rates every other meeting, that the economic staff at the Federal Reserve no longer expect the economy to fall into a recession this year, and telling Yahoo Finance's Jennifer Schonberger that instability in the banking sector has "settled down" after several banks failed earlier this year.
Read more: What the Fed rate hike means for bank accounts, CDs, loans, and credit cards
But a comment from Powell early on in his press conference stood out to us as a window into some real talk from the Fed chair on the inflation conversation.
"It is a good thing headline inflation has gone down a bit," Powell said. "I would say that having headline inflation move down that much...will strengthen the broad sense that the public has that inflation is coming down, which will, in turn, we hope, help inflation continue to move down."
In June, headline CPI showed prices rose 3% over the prior year, the least since March 2021. But on a "core" basis, prices rose a more robust 4.8% over last year.
Helping slow the increase in headline inflation last month was a 26.6% drop in the price of gas from a year ago.
As readers may be familiar, there are two monthly inflation readings and, within those readings, two distinct measures for price increases.
The Consumer Price Index (CPI), published by the Bureau of Labor Statistics, is the more widely followed inflation reading. When folks on Wall Street reference inflation they are usually referencing the CPI numbers.
Then there is the Personal Consumption Expenditures (PCE) Price Index published by the Bureau of Economic Analysis. This data feeds directly into the BEA's quarterly GDP report and is the Fed's preferred inflation measure.
Both reports contain what are referred to as "headline" and "core" inflation.
"Headline" inflation includes everything tracked in both reports; "core" inflation strips out food and gas prices, which can be quite volatile given how much commodity markets influence prices for these goods.
The Fed prefers to look at "core" numbers. But as Powell acknowledged, "core" inflation is not how people experience price increases within their household budget.
The overall message from Powell on Wednesday continued to be that there remains a long way to go for inflation to return to target, acknowledging in his press conference the Fed does not see 2% inflation until 2025.
As a result, the Fed expects that rates will remain high for some time. This has been a version of the central bank's message for months now.
In the background of the Fed discussion this year has been a thought that perhaps this 2% target would be abandoned or revised. Maybe, after all this, a 3% target is more reasonable. Yet nothing from Powell or any other official suggests this is being seriously considered at the Fed.
After all, it was only three years ago the Fed changed its goal on inflation from 2% inflation to inflation that averages 2% over time. This change was encouraged by the Fed having undershot its goal for many years after the financial crisis; 18 months later, the Fed was firefighting a rapid inflation surge. The fight continues today.
But Powell offering a pragmatic view on inflation is a reminder that, at least for this Federal Reserve, practice outweighs pedagogy. And so perhaps the door is open to some compromise on inflation goals and readings. Starting, it seems, in 2025.
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