The latest reading of the Fed’s preferred gauge of inflation showed price increases falling month-on-month in November, but remaining steady as the central bank struggles to bring inflation back to its 2% target.
data, Released early Friday by the Bureau of Economic Analysis (BEA)This comes after the central bank cut interest rates by 25 basis points at its final policy meeting of the year on Wednesday. Officials also signaled less easing in 2025, with inflation expected to remain high over the longer term.
In November, the core personal consumption expenditures index, which excludes food and energy costs and is closely tracked by the Fed, rose 0.1% from the previous month, a slowdown from October’s 0.3% monthly gain in prices and slower pace. Since May.
The monthly increase was slightly lower compared to economists’ expectations for a 0.2% increase as service inflation in sectors such as housing and utilities slowed compared to the previous month.
“Inflation in November was milder than expected, but firmness in some categories supports the Fed’s hesitation to cut interest rates meaningfully next year,” wrote Jeffrey Roach, chief economist at LPL Financial. “The economy continues to grow thanks to strong consumer demand, as income growth and the wealth effect of rising portfolio values give consumers the power to spend.”
Over the previous year, core prices rose 2.8%, matching the increase seen in October and also below Wall Street’s expectations of a 2.9% rise. On an annual basis, total personal consumption expenditures rose 2.4%, up from 2.3% recorded in October. Economists surveyed by Bloomberg had expected an annual increase of 2.5%.
This edition follows flat inflation readings from other November data sets.
Earlier this month, the core CPI, which excludes the more volatile costs of food and gas, saw prices in November rise 3.3% from a year ago for the fourth month in a row.
Meanwhile, the core Producer Price Index (PPI), which tracks price changes seen by companies, revealed prices rose 3.4% annually in November. That’s higher than a 3.1% jump in October and also ahead of economists’ expectations of a 3.2% increase.
In a news conference following Wednesday’s interest rate decision, Federal Reserve Chairman Jerome Powell indicated that the last mile of the Fed’s battle to curb inflation was more difficult than central bank leaders initially expected.
Read more: What a Fed rate cut means for bank accounts, CDs, loans and credit cards
“We had year-end inflation expectations, and they’re kind of collapsing as we get toward the end of the year,” Powell said. “I can tell you that may be the single biggest factor – inflation has once again underperformed compared to expectations.”
So far this year, inflation has moderated but remains stubbornly above the Fed’s 2% annualized target, pressured by hotter-than-expected readings of monthly “core” price increases in recent months.
According to updated economic forecasts from the Fed’s Summary of Economic Outlook (SEP), the central bank expects core inflation to peak at 2.5% next year, higher than the September forecast of 2.2%, before cooling to 2.2% in 2026 and 2.0% in 2027.
High inflation expectations, coupled with a slowing pace of interest rate cuts next year, have put pressure on markets in the wake of the decision as investors continue to debate an uncertain future.
The election of Donald Trump as the country’s next president has increased this state of uncertainty. With the controversy of some economists The United States may face another surge in inflation if Trump follows through on his key campaign promises.
Economists consider that the policies proposed by Trump, such as higher tariffs on imported goods, corporate tax cuts, and restrictions on immigration, may be inflationary. These policies could further complicate the Fed’s path forward on interest rates.
Powell said on Wednesday that the central bank expects “significant policy changes” but warned that the extent of policy adjustments remains uncertain.
“We need to see what it is and what its implications are,” he told reporters, adding that the Fed is “thinking about these questions.”
“We’ll have a much clearer picture” once that happens, he said.
Alexandra Canal He is a senior reporter at Yahoo Finance. Follow her on X @allie_canal, linkedin, And email it to alexandra.canal@yahoofinance.com.
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