PCE: Fed's preferred inflation gauge meets expectations in December

Updated Fri, Jan 31, 2025, 7:09 AM 2 min read

The latest reading of the Federal Reserve's preferred inflation gauge showed prices increased in line with expectations in December as inflation remained above the Fed's 2% target.

The "core" Personal Consumption Expenditures (PCE) index, which strips out food and energy costs and is closely watched by the central bank, rose 0.2% from the prior month during December, meeting Wall Street's expectations. The reading was higher than the 0.1% increase seen in November.

Over the prior year, core prices rose 2.8%, in line with Wall Street's expectations and unchanged from November. On a yearly basis, overall PCE increased 2.6%, a pickup from the 2.4% seen in November.

The reading comes two days after the Federal Reserve paused its interest rate-cutting cycle after reducing rates at its prior three meetings. Fed Chair Jerome Powell described inflation as "somewhat elevated relative to our 2% longer-run goal" during his press conference on Wednesday.

After the meeting, economists largely argued that the Fed appears to be waiting for more inflation data and a clearer picture of Trump's potential tariff plans.

"In the current situation there’s probably some elevated uncertainty because of, you know, significant policy shifts in those four areas that I mentioned: tariffs, immigration, fiscal policy, and regulatory policy," Powell said on Wednesday.

Further news on tariffs, which many believe could keep inflation above the Fed's target, is expected over the weekend. President Trump said he plans to put a 25% tariff on imports from Mexico and Canada on Feb. 1.