Inflation Remains Elevated, Fed's Preferred Gauge Stays Above Target
December's data shows core Personal Consumption Expenditures (PCE) inflation rose in line with expectations, maintaining its level above the Federal Reserve's target of 2%. The monthly increase of 0.2% met Wall Street's forecast, exceeding the 0.1% rise in November. Year-over-year, core PCE prices grew by 2.8%, unchanged from the previous month.
Overall PCE inflation accelerated to 2.6% annually, up from 2.4% in November. These readings follow the Federal Reserve's decision to pause interest rate cuts after three consecutive reductions.
Fed Chair Jerome Powell acknowledged inflation as "somewhat elevated" compared to the bank's long-term goal during his post-meeting press conference. Economists believe the Fed is awaiting additional inflation data and clarity on trade policy before taking further action.
The upcoming tariff negotiations may impact inflation, with many experts predicting an upward pressure. President Trump has announced plans to impose a 25% tariff on Mexican and Canadian imports starting February 1.