Feds preferred inflation gauge ticked higher to 2.8% stoking doubts on December rate cut

The Federal Reserve’s preferred measurement of inflation showed the rate of price increases ticked a bit higher in October, which will likely reinforce the central bank’s cautious approach when it meets to decide on cutting interest rates next month.The core Personal Consumption Expenditures price index, a key measure of inflation that tracks average change in prices paid by consumers for goods and services with the exception of food and energy, rose 2.8% year over year last month, according to the Commerce Department.In September, core PCE rose 2.7%.On a month-to-month basis, the core PCE rose 0.3%.Both the annualized rate and the month-over-month figure were in line with the consensus views among investors on Wall Street.The overall PCE was up 2.3% — which is higher than the 2.1% rate that was reported in September.Economists closely watch core prices because they typically provide a better read on where inflation is headed.Inflation has fallen sharply since it peaked at 7% in mid-2022, according to the Fed’s preferred measure.

Yet yearly core inflation has fluctuated between 2.6% and 2.8% since February.Price increases have remained elevated in services, including apartment rents, restaurant meals, and car and home insurance.Wednesday’s report also underscored that Americans’ incomes and spending remained healthy, a key reason the economy has kept growing this year despite widespread fears of a slowdown.Incomes grew 0.6% from September to October, faster than economists had expected, while consumer spending rose by a solid 0.4% last month.Subscribe to our daily Business Report newsletter! Please provide a valid email address.

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Solid growth and stubborn inflation, however, may keep Federal Reserve officials from cutting their key interest rate as quickly as they had signaled at their last meet...