Prices were little changed in November but remained above the Fed’s target compared with a year ago, according to a measure released by the Commerce Department on Friday.
this personal consumption expenditures price indexThe Fed’s preferred inflation gauge showed growth of just 0.1% from October. The indicator showed annual inflation at 2.4%, still above the Fed’s 2% target but below the 2.5% forecast by Dow Jones. The monthly data was also 0.1 percentage points below forecast.
Excluding food and energy, core PCE also increased by 0.1% month-on-month and 2.8% compared with the same period last year. Both data were also 0.1 percentage points lower than forecast. Fed officials generally believe the core data provides a better gauge of long-term inflation trends because it excludes the more volatile natural gas and grocery categories.
Annual core inflation data were unchanged from October, while headline rates rose 0.1 percentage points.
Data showed that commodity prices barely increased, while service prices increased by 0.2%. Food and energy prices also rose 0.2% each. Over the past 12 months, the price of goods fell by 0.4%, but the price of services increased by 3.8%. Food prices rose 1.4%, while energy prices fell 4%.
Housing inflation, one of the trickier components of the economic cycle, showed signs of cooling in November, rising just 0.2%.
The revenue and expense data released were also slightly lighter than expected.
Personal income rose 0.3% after rising 0.7% in October, missing expectations of 0.4%. In terms of spending, personal spending increased by 0.4%, one-tenth of a percentage point lower than forecast.
The personal savings rate fell slightly to 4.4%.
stock market futures U.S. Treasury yields remained in negative territory after the report was released, while Treasury yields also fell.
Two days before the report was released, the Federal Reserve would lower its benchmark interest rate by another quarter percentage point to a target range of 4.25%-4.5%, the lowest level in two years. However, Chairman Jerome Powell and his colleagues have reduced the expected path for 2025, now making just two cuts, compared with the four cuts indicated in September.
Although Powell said on Wednesday that inflation has moved “closer” to the Fed’s target, he said the change in the expected path of rate cuts reflects “expectations that inflation will be higher” in the year ahead.
“It’s common sense that when the road is uncertain, you go slower,” Powell said. “It’s like driving on a foggy night or walking into a dark room full of furniture. You Just slow down.”
