Something unusual is happening with U.S. inflation data. While the core Consumer Price Index (CPI) has looked relatively cool recently, core Personal Consumption Expenditures (PCE) inflation has risen sharply. The incremental widening between the two inflation measures has accelerated meaningfully over the past few months, largely driven by the rapid adoption and buildout of AI in the U.S. economy. Even without the risks introduced by the Iran conflict, the evolving trends in the inflation data would have complicated the outlook for Federal Reserve rate cuts. The three-month annualized pace of core PCE surged from ... (full story)