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The Federal Reserve’s preferred inflation gauge moved slightly higher in November — but not as much as economists were expecting, an indication that price hikes aren’t accelerating in a worrisome fashion.
Still, cost of living concerns are growing as 2025 approaches and uncertainty widens about potential inflationary global events and domestic policies.
The Personal Consumption Expenditures price index rose 2.4% in November from the year before, heating up from the 2.3% increase notched in October, according to new Commerce Department data released Friday.
On a monthly basis, prices rose just 0.1%, a slower pace of growth than the 0.2% increase seen in October. Economists expected a 0.2% monthly increase, according to FactSet.
An increase in the annual rate of inflation was fully expected because of comparisons to a year-ago period when inflation cooled rapidly as well as some hurricane- and holiday-driven price hikes considered to be fleeting.
However, Friday’s reading came in better than the 0.2% monthly gain and 2.5% annual increase economists were expecting, according to FactSet consensus estimates.
Plus, the closely watched “core” measure of inflation, which excludes the more-volatile food and energy categories, rose at the slowest monthly pace since May and resulted in the annual rate holding steady at 2.8%, Commerce Department data shows.
Inflation has cooled substantially this year but has been moving sideways in recent months, prompting the Fed to take a more cautious approach to rate cuts in the coming year. Fed Chair Jerome Powell said Wednesday that there’s been “significant progress” on inflation, but uncertainty also is growing.
While the trajectory indicates disinflation remains at hand, there’s heightened concern around how that could change next year. Most economists say President-elect Donald Trump’s policy proposals around tariffs, immigration and taxes could be inflationary.
Cleveland Fed President Beth Hammack, who dissented at the Fed’s policy meeting earlier this week, favoring a pause rather than the quarter-point cut the other 11 voting Fed officials opted for, said she needs to see “further evidence that inflation is resuming its path to our 2% objective.”
Until then, ”I believe that monetary policy will need to remain modestly restrictive for some time,” she said in a statement released Friday morning.
“The economy’s momentum and recent elevated inflation readings caused me to revise up my inflation forecast for next year,” Hammack added. Ultimately, she said her decision was “a close call,” echoing Powell, who also said Wednesday’s rate cut decision was “a closer call” compared to recent meetings.
This story is developing and will be updated.
