The latest reading of the Federal Reserve’s preferred inflation gauge showed price increases fell month-over-month in November but still remained tight as the central bank struggles to bring inflation back to its 2% target.
The data, released early on Friday by the Bureau of Economic Analysis (BEA), comes after the central bank cut interest rates by 25 basis points at its final policy meeting of the year on Wednesday. Officials also noted that less easing will occur in 2025, and inflation is expected to remain elevated over the long term.
In November, the core Personal Consumption Expenditure (PCE) index, which excludes food and energy costs and is closely watched by the Federal Reserve, rose 0.1% from the previous month, a slowdown from the increase monthly prices of 0.3% in October and the slowest pace. since May.
The monthly increase was slightly lower compared to economists’ expectations for a 0.2% increase, as services inflation for sectors such as housing and utilities saw a slowdown compared to the previous month.
“November inflation was milder than expected, but tightness in some categories supports the Fed’s hesitancy to lower rates substantially next year,” wrote Jeffrey Roach, chief economist at LPL Financial. “The economy continues to grow off of strong consumer demand as income growth and the wealth effect of higher wallet values give consumers the ability to spend.”
Over the past year, underlying prices rose 2.8%, matching the increase seen in October and also below Wall Street expectations for a 2.9% increase. On an annual basis, headline PCE rose 2.4%, a rebound from the 2.3% seen in October. Economists surveyed by Bloomberg had forecast an annual increase of 2.5%.
The print follows difficult inflation readings from other November data sets.
Earlier this month, the core Consumer Price Index (CPI), which excludes the more volatile costs of food and gas, saw prices in November rise 3.3% from last year for the fourth month consecutive.
Meanwhile, the core producer price index (PPI), which tracks price changes seen by businesses, revealed that prices rose 3.4% year-on-year in November. This represents an increase from 3.1% in October and also exceeds economists’ expectations for a 3.2% increase.
At a news conference following Wednesday’s interest rate decision, Federal Reserve Chair Jerome Powell indicated that the latest leg of the Fed’s fight to curb inflation has been more challenging than he thought. central bank leaders initially projected.
Read more: What the Federal Reserve’s rate cut means for bank accounts, CDs, loans and credit cards
