Core PCE Inflation Edges Higher in December

The U.S. core Personal Consumption Expenditures (PCE) price index, which excludes food and energy costs, increased by 0.2% in December 2024, according to data from the Bureau of Economic Analysis.

This marks a slight uptick from the 0.1% rise in November, which had been the lowest in six months. The increase aligned with market expectations, indicating steady underlying inflation pressures.

Annual Core Inflation Remains Above Fed Target

On an annual basis, core PCE inflation remained at 2.8% for the second consecutive month, well above the Federal Reserve’s 2% target. The persistence of elevated inflation reinforces the Fed’s cautious stance on monetary policy, as policymakers weigh future rate adjustments while monitoring inflationary trends.

Market Implications

The December data suggests that inflationary pressures remain moderate but stubbornly above the Fed’s preferred range. While the slight monthly uptick does not indicate a significant resurgence in inflation, the steady 2.8% annual rate could influence the Fed’s decision-making in the coming months, particularly regarding the timing and extent of potential interest rate cuts in 2025.

Source: Bureau of Economic Analysis