Fed Inflation Gauge Shows Slight Increase, Meeting Expectations
The Federal Reserve's preferred inflation gauge, the Personal Consumption Expenditures (PCE) index, rose 0.2% in December, in line with expectations. The core index, excluding volatile food and energy prices, increased by 0.2% month-over-month and 2.8% year-over-year.
Despite the increase, inflation remains above the Fed's 2% target. The Fed's recent decision to pause rate cuts reflects its concerns about elevated inflation.
Jerome Powell, the Fed chair, has stated that inflation is "somewhat elevated relative to our 2 percent longer-run goal." Economists believe the Fed is waiting for additional inflation data and clarity on potential tariff plans before making further rate adjustments.
Upcoming tariff announcements could impact inflation. President Trump plans to implement a 25% tariff on imports from Mexico and Canada, which may further contribute to inflation pressures.