Prices barely budged in November but were still above the Federal Reserve’s target compared to a year ago, according to a Commerce Department measure released Friday.
The Price index of personal consumption expendituresthe Fed’s preferred inflation indicator, showed an increase of just 0.1% from October. The metric suggested an annual inflation rate of 2.4%, still above the Fed’s 2% target but lower than the Dow Jones’ 2.5% estimate. The monthly value was also 0.1 percentage points below the forecast.
Excluding food and energy, core PCE also rose 0.1% monthly and was 2.8% higher than a year ago, with both readings also 0.1 percentage points below forecast. Fed officials generally consider the core reading to be a better indicator of long-term inflation trends because it excludes the volatile gas and food categories.
The annual core inflation reading was the same as in October, while the headline rate rose 0.1 percentage point.
The readings reflected a small increase in goods prices and a 0.2% increase in services prices. Food and energy prices also rose by 0.2% each. On a 12-month basis, goods prices fell 0.4%, but services rose 3.8%. Food prices rose 1.4% while energy prices fell 4%.
Housing inflation, one of the harsher components of inflation during its economic cycle, showed signs of cooling in November, rising just 0.2%.
The income and expense figures in the release were also slightly below expectations compared to expectations.
Personal income rose 0.3% after rising 0.7% in October, falling short of the 0.4% estimate. In terms of spending, personal spending rose 0.4%, a tenth of a percentage point below forecast.
The personal savings rate fell slightly to 4.4%.
Stock market futures remained in negative territory following the report, while Treasury yields also fell.
“Stubborn inflation seemed a little less stuck this morning,” said Chris Larkin, managing director of trading and investing at E-Trade Morgan Stanley. “The Fed’s preferred inflation indicator came in lower than expected, which may ease some of the market’s disappointment over the Fed’s interest rate announcement on Wednesday.”
The report comes just two days after the Fed cut its key interest rate by another quarter of a percentage point to a target range of 4.25% to 4.5%, the lowest level in two years. However, Chairman Jerome Powell and his colleagues reduced their expected course for 2025, now announcing just two cuts, compared to four announced in September.
Although Powell said Wednesday that inflation has moved “much closer” to the Fed’s target, he said the changes in the forecast rate cut path “reflect the expectation of higher inflation” in the coming year.
“It’s kind of common sense to think that if the path is uncertain, you go a little slower,” Powell said. “It’s no different than driving on a foggy night or walking into a dark room full of furniture. You just slow down.”