US inflation: Is it finally taking off?

Need to prevent another 'taper tantrum'

Paul Diggle, economist at Aberdeen Asset Management, discusses the prospect for a US economy as inflation begins to rear its head.

The personal consumption expenditures (PCE) inflation measure, which is the Federal Reserve's preferred gauge, was stuck in the low and narrow range of 0.2% to 0.3% year-on-year for most of 2015. The consumer price index (CPI) measure, which is the benchmark measure of inflation elsewhere in the world, was range-bound at an even lower -0.2% to +0.2% over the same period. But in November 2015 something started to change: both measures of inflation began to rise. The latest data points are for January 2016, when inflation on both the PCE and CPI measures stood at 1.3%. This rebound i...