Fed’s preferred inflation gauge ticks up, denting rate-cut hopes

Washington (TIP)- The Federal Reserve’s preferred inflation gauge ticked up in November in the latest sign that prices remain stubbornly elevated, while consumers spent at a healthy pace.
Consumer prices rose 2.8% in November from a year earlier, the Commerce Department said, up from a 2.7% annual pace in October.
Excluding the volatile food and energy categories, core prices also increased 2.8% in November from a year ago, slightly higher than October’s 2.7%.
Consumer spending climbed 0.5% in November from the previous month, the report also showed, a solid increase that hits at an economy growing at a healthy pace in the final three months of last year.
The figures point to a mostly strong economy with inflation still elevated, but down sharply from a four-decade peak in June 2022. Hiring has slowed to a crawl, however, leaving job-seekers frustrated even as the unemployment rate stays low.
January 22 figures suggest that the Federal Reserve will be less likely to reduce its key interest rate when it meets next week, a tact typically used if it is worried about a stumbling economy.
“Today’s data should reassure the Fed that the economy remains on a solid footing, despite a cooler labor market,” said James McCann, an economist at Edward Jones. “Indeed, there looks to be little urgency to cut rates at next week’s meeting, and the central bank could stay on hold for longer should growth remain robust into 2026 and inflation continue to run at above target rates.”
On a monthly basis prices, were milder: Both overall inflation and core inflation moved up just 0.2% in November from October.
The figures suggest that the Federal Reserve, headed by Jerome Powell, will be less likely to reduce its key interest rate when it meets next week, a tact typically used if it is worried about a stumbling economy. ZUMAPRESS.com
At that pace, over time inflation would move closer to the Federal Reserve’s target of 2%. The data was delayed by the six-week government shutdown last fall.
The solid figures on consumer spending follow a separate report Thursday which showed that the economy expanded at a healthy 4.4% annual rate in the July-September quarter, the fastest growth in two years.
The data points to continued solid growth in the final quarter of 2025.
Though inflation subsided in October and November, that was because the government shutdown injected a downside bias to prices. The government was unable to collect most of the data to compile ?the Consumer Price Index report for October. Similarly most data was unavailable for October’s import prices report.
These data gaps also impacted reports for November CPI and import prices. But the government was able to publish the Producer Price Index report for October. The Personal Consumption Expenditures price indexes, tracked by the U.S. central bank for its 2% target, are calculated using some of the data from the CPI, PPI and import prices reports.
“To replace the missing CPIs, BEA derived seasonally adjusted price indexes for October using the geometric mean of the September and November CPIs,” the BEA said. “BEA derived non-seasonally adjusted price indexes by applying seasonal adjustment factors from October 2024 to the imputed seasonally adjustedc values for October 2025.”
The PCE price index increased 0.2% in November, matching October’s gain. In the 12 months through November, the PCE Price Index climbed 2.8% ?after rising 2.7% in October.
Excluding the volatile food and energy components, the PCE price index 0.2% after by the same margin in October. In the 12 months through November, the so-called core inflation increased 2.8% after advancing 2.7% in October.
December CPI data have suggested core PCE picked up last month, with economists’ estimates as high as a 0.4% increase, which would translate to a year-on-year rise of 3.1%. December’s PCE inflation data will be released on February 20. The Fed is expected to keep interest rates unchanged later this month. Source: Reuters