The Federal Reserve’s preferred inflation gauge, the Personal Consumption Expenditures (PCE) price index, increased by 0.1% from October and reached a 2.4% annual rate, both below expectations. The core PCE, which excludes food and energy, also rose 0.1% monthly and was 2.8% higher from a year ago.
The increase in inflation rates is still above the Federal Reserve’s target of 2%, but lower than expected. Food and energy prices increased by 0.2% each month, while goods prices fell 0.4% over the past year. Services prices rose 3.8%.
The report also showed a slight cooling of housing inflation, with prices increasing only 0.2%. Personal income rose 0.3%, but short of the expected 0.4% growth. Personal expenditures increased 0.4%, one-tenth of a percentage point below forecast.
Stock market futures remained in negative territory after the report, while Treasury yields fell. Fed officials expressed relief that the inflation gauge was lower than expected, which may have mitigated some of the market’s disappointment with the recent interest rate cut.
The Federal Reserve has reduced its expected path for future rate cuts, penciling in just two reductions compared to four previously indicated. Chair Jerome Powell attributed this shift to his expectation that inflation will be higher in the year ahead.
Source: https://www.cnbc.com/2024/12/20/pce-inflation-november-2024-.html