The Federal Reserve’s favorite inflation gauge came in line with expectation, although continuing to remain above the central bank’s target.
The Federal Reserve’s favorite inflation gauge came in line with expectations, although continuing to remain above the central bank’s target.
November Inflation Signals That Traders Can’t Ignore: Inflation, as measured by the price consumption expenditure (PCE) index, climbed 2.8% year over year (YoY) in November following a 2.8% rise in October. The increase, however, was in line with expectations. The annual rate of the core PCE index also hit 2.8% in November, up from 2.7% in October.
The PCE index for food slowed to 1.9% in November from 2.2% in October, while energy goods and services inflation accelerated notably to 4.1% from 2.2%. With energy prices on the boil, especially with the spike in heating oil and natural gas, there appears to be upside risk to inflation, although the core reading that strips energy and food prices could have a more muted showing.
On a month-over-month basis, the PCE and core PCE edged up 0.2% each in October and November, aligning with economists’ expectations.
Among the other key numbers:
- Personal income’s monthly growth accelerated to 0.3% in November from 0.1% in October; consensus 0.4%
- Personal spending rose at a steady monthly pace of 0.5% in November; consensus 0.5%
- The personal savings rate — personal savings as a proportion of disposable income — was at 3.5% in November.
Rate Pause A Foregone Conclusion? The Federal Reserve’s rate-setting committee, the Federal Open Market Committee (FOMC), is scheduled to meet for a two-day meeting that kicks off on Jan. 27-28. The odds are heavily stacked in favor of a pause decision.
The CME FedWatch Tool, constructed based on expectations of futures traders, shows 95% probability of the Fed standing pat on rates after three straight quarter-point cuts since September 2025.
Thursday’s data, including the weekly jobless claims and third-quarter GDP, all support the case for a pause. But it remains to be seen whether Fed’s Jerome Powell would defy political pressure and continue to adhere to the central bank’s data-dependent stance.