PCE Inflation, the Feds Preferred Measure, Sped Up in November

Federal Reserve officials are closely watching how inflation shapes up as they contemplate when and how much to cut interest rates in 2025, and the latest inflation data underscored why they have reason to be wary.The central bank’s preferred inflation measure climbed 2.4 percent in November from a year earlier, faster than its 2.3 percent rate in October and notably quicker than the central bank’s 2 percent target.After stripping out food and fuel costs, both of which bounce around from month to month, “core” inflation was 2.8 percent.That was in line with its previous reading, and slightly lower than what economists had forecast.On a monthly basis, both overall and core inflation climbed 0.1 percent — slightly less than what economist had expected, and slower than in October.While the report as a whole suggested that progress on inflation had not stalled quite as much as expected, the pickup in the annual inflation figure still served a reminder that bringing price increases back to a normal pace remains a bumpy and incomplete project.Fed officials raised interest rates sharply in 2022 and 2023 to try to wrestle price increases back under control.

But months of progress on inflation and signs of a slowdown in the job market spurred them to lower borrowing costs starting in September.Policymakers have cut interest rates three times as of their meeting this week, lowering them by a full percentage point in total.But the next phase of monetary policy is much more uncertain.

Officials are unsure how much more they should lower interest rates, as inflation proves sticky and as the job market shows signs of stabilizing.They have been clear that they will focus intently on the pace of price increases as they contemplate future rate cuts, which are likely to be fewer and farther between.“The slower pace of cuts for next year really reflects both the higher inflation readings we’ve had this year, and the expectation inflation will be higher,” Jerome H.

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