Commerce Department data released Friday showed prices were little changed in November but remained above the Fed’s target from a year ago.
The Federal Reserve’s preferred measure of inflation, the Personal Consumption Expenditure Price Index, rose just 0.1% from October. The measure shows inflation at an annual rate of 2.4%, still above the Fed’s 2% target but lower than the Dow Jones forecast of 2.5%. Monthly statistics were also 0.1 percentage points lower than expected.
Core PCE, which excludes food and energy, also rose 0.1% month-over-month and 2.8% year-over-year, with both measures 0.1 percentage point below expectations. Fed officials generally believe that the core value is a better gauge of long-term inflation trends because it excludes volatile gases and food categories.
The annual core inflation rate was the same as in October, but the headline interest rate rose by 0.1 percentage points.
This measure reflects a 0.2% increase in service prices with little increase in goods prices. Food and energy prices also rose by 0.2%. On a 12-month basis, goods prices fell by 0.4%, while services rose by 3.8%. Food prices rose 1.4%, but energy prices fell 4%.
Housing inflation, which has been one of the biggest drivers of inflation during his economic cycle, showed signs of easing in November, rising just 0.2%.
Revenue and expense figures provided in the release were also slightly lighter than expected.
Personal income rose 0.3% after rising 0.7% in October, falling short of expectations of 0.4%. As for spending, personal spending rose 0.4%, one-tenth of a percentage point below expectations.
The personal savings rate fell slightly to 4.4%.
After the news, stock market futures moved into negative territory, and U.S. Treasury yields also fell.
“Inflation, which had been sticky, seems to have eased a little this morning,” said Chris Larkin, managing director of trading and investments at E-Trade Morgan Stanley. “The Fed’s desired inflation measure is lower than expected, which may ease some of the market’s disappointment with the Fed’s interest rate announcement on Wednesday.”
The report was released just two days after the Fed cut its policy rate by another quarter of a percentage point, setting it in a two-year low target range of 4.25% to 4.5%. However, Chairman Jerome Powell and his colleagues have reduced the expected cuts in 2025, with only two cuts now in place, compared to four in September. are.
Chairman Powell said Wednesday that inflation is “very close” to the Fed’s target, but the expected change in rate cut path reflects “an expectation that inflation will be even higher” in the year ahead. said.
“It’s kind of common sense to go a little slower when the path is uncertain,” Powell said. “It’s no different than driving a car on a foggy night or walking into a dark room full of furniture. You just slow down.”
