Inflation has stalled above policymakers’ 2% target, according to data released Friday morning, bolstering the case for the Federal Reserve’s decision earlier this week to pump the brakes on its interest rate cutting campaign.
December Inflation was above the ideal level yet again.
The personal consumption expenditures (PCE) index was up 2.6% last month compared to November and 0.3% compared to December 2023, according to the Commerce Department.
Median economist forecasts called for 2.6% annual PCE increase and a 0.3% month-over-month increase for the measure which tracks Americans’ monthly spending on consumer goods and services, according to Dow Jones data.
Core PCE, which excludes the index’s more volatile food and energy categories, was 0.2% higher last month than it was in November, meeting economist estimates of 0.2%.
And core PCE was 2.8% higher in December compared to December 2023, compared to economist estimates of 2.8%, where it stood in October and November.
It’s the 46th consecutive month above 2.5% for the Fed’s preferred inflation metric of annual core PCE inflation, evidence of the historic stretch of higher prices for Americans, considering the measure had been below 2.3% from 2008 to 2020.
“We seem to be set up for further progress, but being…set up for it is one thing, having it is another,” Fed Chairman Jerome Powell said at a Wednesday press conference, reaffirming the Fed’s inflation “goal is 2% and we do mean to get back sustainably at 2%.”
Powell’s comments followed the Fed’s Wednesday announcement it decided to keep rates steady, concluding its first meeting since July without a rate cut due to what it described as limited inflation progress. PCE is considered by some to be a more accurate measure of inflation than its counterpart consumer price index, which measures price changes, as PCE accounts for any substitutions made by consumers due to price changes. Median forecasts from Fed policymakers last month called for slow progress toward 2% inflation, projecting 2.5% core PCE inflation by the end of 2025, 2.2% by the end of 2026 and finally 2% by 2027. Goldman Sachs economists project slightly tamer 2.4% inflation by the end of this year, though that’s an increase from its 2% forecast prior to the election due to the near-term effects of tariffs.