Latest Inflation Data Shows Prices Rising as Expected, Core Inflation Remains Above Target
The December reading of the Federal Reserve's preferred inflation gauge, the Personal Consumption Expenditures (PCE) index, increased by 0.2% month-over-month, matching expectations and indicating continued inflation above the Fed's 2% target. Over the past year, core prices have risen by 2.8%, also in line with expectations.
Overall PCE rose by 2.6% year-over-year, slightly higher than the 2.4% recorded in November. These results come days after the Fed paused its rate-cutting cycle following three consecutive rate cuts.
Fed Chair Jerome Powell acknowledged during his press conference that inflation remains elevated. However, economists believe the Fed is awaiting further inflation data and clarity on potential tariff plans before making future decisions.
News regarding tariffs, which some experts believe could keep inflation elevated, is anticipated over the weekend. President Trump has indicated plans to impose a 25% tariff on imports from Mexico and Canada starting February 1.