The Federal Reserve’s (Fed) toolkit is designed to address wide‑range economic issues. If the economy falls into recession, the Fed can cut interest rates and inject liquidity into the Personal Consumption Expenditures (PCE) price index, increased 3.4% over the 12 months ending in August, while core PCE rose 3.0%, each well above the Fed’s 2% target (exhibit 1). However, not every price category responds to the Fed’s actions. Housing and health‑care prices adjust slowly via leases and contracts, making them sticky. Cars and furniture, frequently financed, react to borrowing costs, and their prices have already flattened or begun to decline. Energy stands out, with gasoline up 34.2% over the year as Middle East tensions lifted crude oil above $100 per barrel (exhibits 2 and 3).
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