Inflation Closed Out 2024 on a Strong Note, According to Latest PCE Data
The personal consumption expenditures price index, a gauge closely watched by the Federal Reserve, rose 2.6% on a year-over-year basis in December, exceeding the central bank’s target of 2%. This reading is 0.2 percentage points higher than the November figure and in line with Dow Jones estimates.
Core PCE, which excludes food and energy, registered a 2.8% reading, meeting expectations and matching the prior month’s figure. Historically, the Fed has considered core PCE a better gauge of long-run inflation.
On a monthly basis, headline PCE increased 0.3%, while core PCE rose 0.2%, both in line with forecasts. Chicago Fed President Austan Goolsbee described the PCE data as “even a little better than expected” and expressed comfort that the Fed is on track to meet its 2% inflation target.
Food prices rose 0.2% on the month, while energy prices jumped 2.7%. Durable goods prices, which include items such as aircraft, appliances, and electronics, showed deflation, falling 0.4%. Nondurables saw a 0.5% increase.
The report comes after the Fed voted unanimously to hold its key interest rate range steady at 4.25%-4.5%. Some analysts argue that the central bank’s decision to cut interest rates in December was ironic, given that inflation remained elevated.
Fed Governor Michelle Bowman expects inflation to decelerate through 2025 but thinks the central bank should remain on hold until clear signs of a slowdown are evident. The report also showed that personal income increased 0.4% in December, while spending rose 0.7%.
