Given that services account for more than 60 percent of household consumption expenditure, it is not surprising to find inflation creeping up with the upturn in the business cycle, even if unemployment remains stubbornly high. The recent movements in the trimmed mean of U.S. PCE inflation on the next graph show this point.
Here the trimmed mean PCE inflation is usually regarded as representing the steady trend component of PCE inflation. 1  2  Here I refer to the “difference” version of Okun’s Law. BIS central bankers’ speeches  Turning to Japan, we can draw graphs that are quite similar to the U.S. ones that we have just seen.