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A fresh reading from the Federal Reserve's preferred inflation gauge showed prices remained sticky in the final month of 2024, a new data point that likely reinforces a current wait-and-see approach to interest rates.
The "core" Personal Consumption Expenditures (PCE) index, which strips out food and energy costs, rose 2.8% over the prior year during the month of December — stuck at the same year-over-year level recorded in November.
On a month-over-month basis, "core" PCE rose 0.2%, faster than the 0.1% seen in November. The annual and monthly figures were in line with Wall Street expectations.
The new sign that inflation isn't making dramatic movements up or down comes after the Fed this week decided to keep rates on hold, its first pause following three consecutive cuts at the end of 2024.
Read more: Fed rate decision: How it affects your bank accounts, loans, credit cards, and investments
The pause is part of a new caution on the part of the central bank as it keeps one eye on inflation and the other on several unknowns about the economic policies of the new Trump administration.
Many Fed officials have made it clear they are increasingly concerned about signs of persistent inflation and how that could be affected by potential tariffs, immigrant deportations, and tax cuts. In December, officials scaled back the number of estimated cuts this year to two from four.
Fed governor Michelle Bowman said in a new speech Friday in New Hampshire before the new inflation numbers were released that she would like to see progress in lowering inflation before making "any further adjustments to the target range."
"As we enter a new phase in the process of moving the federal funds rate toward a more neutral policy stance, I would prefer that future adjustments to the policy rate be gradual," Bowman said.
However, Bowman did say she thinks that inflation will begin to decline again and that by year-end it will be lower than where it now stands.
Progress, she added, may be "bumpy and uneven,” and the upcoming inflation data for the first quarter will be an important indication of how quickly progress will happen. She underscored that she continues to see greater risks to inflation, especially while the job market remains near full employment.
Some analysts think the Fed is done cutting for the year.
"We remain comfortable with our call that the cutting cycle is over," Bank of America economists said in a research note Thursday.
Anticipating the December PCE inflation data earlier this week, Fed Chair Jerome Powell noted that the Fed would need to see more progress on inflation coming down before moving again on rates and that the central bank was going to take things slow.