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.
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.
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
Easing oil prices and retreating Treasury yields (around 5.23% ) provided some relief to financial markets as improving US-Iran diplomatic prospects reduced immediate inflation concerns.
Hawkish Federal Reserve meeting minutes reinforced expectations for another rate hike this year, pushing Treasury yields higher and supporting the US dollar.
Oil inventories are nearing depletion, increasing supply risks and supporting prices. Aramco estimates less than 6 billion barrels remain after over 1 billion barrels were drawn this year, while the IEA is preparing a 100-million-barrel release. The US 10-year Treasury yield stabilized near 5.31% on Wednesday, close to 24-year peaks, as markets awaited the Fed's minutes.
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