American inflation is out of control again! The release of the "preferred indicator" by the Federal Reserve tonight is not optimistic.

Regardless of what indicators you look at, US inflation is once again moving in the wrong direction. The fourth-quarter core PCE price index increased by 2.7% year-on-year, higher than the initial report of 2.5%. The core PCE for January, to be released on Friday, is expected to increase by 2.6% year-on-year, down from the previous value of 2.7%; overall PCE for January is expected to increase by 0.3% month-on-month, higher than the previous value of 0.2%. Personal Consumption Expenditures (PCE) price index is the preferred measure of inflation for the Federal Reserve. Whether it's housing or a carton of eggs, prices across a range of indicators are once again escalating. This is largely attributed to supply-demand factors and labor market pressures that led to soaring inflation in the early stages of the pandemic, with tariffs imposed by President Trump exacerbating concerns about further price increases. A series of reports indicate that price pressures are rising again from input costs to wage growth to inflation expectations, underscoring the Fed's intention to temporarily maintain interest rates. Potential inflation indicators favored by policymakers may continue to rise in January. "We expect inflation to make a comeback. We have always believed that inflation would make a comeback in the second half of this year, but it looks like inflation pressures are already increasing," said ITR Economics economist Lauren Saidel-Baker. She noted that in addition to tariffs and immigration policy, the government will implement more policies. "I want to be clear: there are upside risks to our inflation outlook." Rising Input Costs Since the outbreak of the pandemic, costs of materials like lumber and steel have been high for several years, and are further increasing. Data from S&P Global shows that this month's manufacturer input price index reached its highest level since October 2022. A similar index from the Institute for Supply Management rose to its highest level since May last month. Businesses surveyed by the Dallas Fed in February reported that the raw materials price index doubled, reaching its highest level since September 2022, when overall US inflation rates peaked. A food manufacturer responded that, due to tariffs, its imported goods will become more expensive, and these higher prices will be borne by consumers. Food manufacturers have stated, "The uncertainty about the future business/consumer environment is greater than at any time in my 40-year career." Grocery prices have once again become a focal point, largely due to the worst avian flu outbreak in US history, leading to historically high egg prices. Rising prices in sectors like food, as well as other major expenses such as housing, healthcare, and auto insurance, are hindering overall inflation progress, although prices for items like furniture and appliances have dropped significantly. Inflation Expectations When consumers anticipate price increases, price hikes become easier, and multiple surveys indicate that consumers and businesses are most concerned about price increases as Trump pushes tariffs. According to data from the University of Michigan, long-term inflation expectations (looking ahead 5 to 10 years) rose to their highest levels since 1995 in February. Expectations for the next year also rose, dragging down confidence indices from the University of Michigan and the World Large Business Federation. Stephanie Guichard, senior economist at the World Large Business Federation, stated in a release on Tuesday that "written responses still mention inflation and prices overall very frequently. Most notably, comments on the current government and its policies dominate the responses." Meanwhile, some businesses have begun to react to Trump's trade policies. Steven Madden Ltd. announced on Wednesday that it will raise prices on some products in the fall to offset higher costs from Chinese tariffs. If tariffs in Mexico take effect, Kontoor Brands Inc., producer of Wrangler and Lee, is considering shifting production, raising prices, or taking other "tangible cost reduction measures." Wage Growth Compensation is often the largest expense for many companies, and this expense may be passed on to consumers. As labor shortages during the pandemic have largely eased, wage growth is overall slowing down, but there are some indicators to watch. According to data from ADP Research, wages for employees rose for the first time in over two years in January. The monthly employment report from the government shows that the increase in average hourly wages last month was comparable to the largest increase since early 2022. The Chief Financial Officer of Host Hotels & Resorts Inc. stated in a recent conference call that the company expects wages and benefits to rise more this year than last year, causing the biggest impact on profitability. The Chief Financial Officer of toy manufacturer Hasbro Inc. stated last week that labor costs are pushing up manufacturing and logistics costs. "Labor issues are becoming more difficult, leading to persistently high inflation rates," he said. "I don't think the negative impact on wages will ease in the short term."