While the most recent reading on core personal consumption expenditures, or PCE, inflation ticked down, indicators of underlying trend inflation remain encouraging overall, providing little signal of an outbreak of inflation to the upside, on the one hand, and reassurance that underlying trend inflation may be close to our target of 2 percent, on the other (figure 1).
The economy has grown 3 percent over the past year, and there are good reasons to expect growth to remain solid next year, supported by the strong underlying momentum in domestic demand. Consumer spending looks to be robust going into the fourth quarter, and ongoing gains in income and employment provide positive fundamentals.