The Fed’s Favorite Measure Of Inflation Was Surprisingly Tame In November | Global News Avenue

Inflation accelerated again in November, on the measure preferred by Fed policymakers, but not as much as forecasters expected.

The U.S. Bureau of Economic Analysis said Friday in its monthly personal consumption expenditures (PCE) report on spending and inflation that the cost of living rose 2.4% year over year in November, up from the 2.3% annual rate increase in October. That’s slower than the 2.5% growth forecasters expected, according to a survey of economists. Dow Jones Newswires and wall street journal.

“Core” inflation, which excludes volatile food and energy prices, rose 2.8% for the year, unchanged from the previous month, rather than rising to the 2.9% median forecast among forecasters. Policymakers are paying more attention to core inflation because food and energy prices rise and fall independently of broader inflation trends.

The subdued inflation rate is particularly surprising because another measure of inflation, the consumer price index, shows rising prices stubbornly rose November. Federal Reserve officials are paying more attention to personal consumption expenditures inflation in setting the nation’s monetary policy. The Fed aims to reduce annual PCE inflation to 2% and keep it there after surging above 7% in 2022.

What does Friday’s personal consumption expenditures report mean for the Fed?

The Fed has been lowering its influential federal funds rate since September as inflation has edged closer to the Fed’s 2% target in recent months. Since then, they have been cutting interest rates from two-decade highs, a move aimed at raising borrowing costs, curbing spending and taming inflation.

However, Fed officials have grown cautious about incoming President Donald Trump’s economic policies May rekindle high inflation And said that interest rates will be cut in the future There are fewer and fewer between.

Friday’s unexpectedly good inflation report is unlikely to change that outlook, CBC economist Ali Jaffery wrote in a commentary.

“The bottom line is that the Fed will be on the sidelines for at least some time,” he wrote.