PCE inflation rises to 2.4% annually in November, 'core' stays at 2.8%

Investing.com -- The personal consumption expenditures (PCE) price index, an inflation metric closely monitored by the Federal Reserve, climbed higher in the year to November. Although this was slightly below expectations, it still offered more evidence backing the US central bank’s more hawkish stance regarding rate cuts next year.

The PCE price index accelerated to a 2.4% annual increase during the month, up from a reading of 2.3% in October, but below the 2.5% expected.

On a monthly basis, the index grew 0.1%, below the 0.2% growth seen in October.

Meanwhile, the so-called "core" metric, which strips out more volatile items like food and fuel, came in at 2.8% annually, unchanged from October, and below the 2.9% expected. Month-on-month, it grew 0.1%, a drop from 0.3% the previous month, in line with expectations.

The Federal Reserve reduced its benchmark interest rate by 25 basis points to a target range of 4.25%-4.5% on Wednesday, marking the third consecutive cut but signaling caution about the pace of future reductions.

However, in its updated “dot plot” of individual rate projections, the Fed now anticipates just two rate cuts in 2025, halving the four reductions projected in September.

This followed the November consumer price index showing inflation at 2.6%, remaining above the Fed's stated 2% target level, while the US economy grew faster than previously estimated in the third quarter, up an annualized 3.1%, and well above what Federal Reserve officials regard as the non-inflationary growth rate of around 1.8%.

"Market pricing moved hawkishly and towards our view of just one further 25 bps cut outlined in our team's 2025 outlook," analysts from Macquarie said in a note, suggesting the end could be near for rate cuts.