Inflation showed signs of slowing in November, according to a key report from the Commerce Department released Friday. The Personal Consumption Expenditures (PCE) price index, the Federal Reserve’s preferred measure of inflation, rose just 0.1% from October, translating to an annual rate of 2.4%.
This was slightly below the Dow Jones forecast of 2.5% but still above the Fed’s 2% target. Core PCE, which excludes food and energy prices and is considered a more stable measure of long-term inflation trends, also increased by 0.1% month-over-month and 2.8% from a year ago, with both figures falling 0.1 percentage points short of expectations.
The report highlighted minimal changes in goods prices, a modest 0.2% rise in services prices, and small gains of 0.2% in both food and energy costs. Over the past year, goods prices have decreased by 0.4%, while services prices have climbed 3.8%. Food prices were up 1.4%, while energy costs declined by 4%. Housing inflation, which has been a particularly persistent component of overall inflation, showed signs of cooling, increasing by just 0.2% in November.
Income and spending data also came in below expectations. Personal income rose by 0.3% in November, a slowdown from October’s 0.7% increase, and fell short of the 0.4% estimate. Personal expenditures rose 0.4%, one-tenth of a percentage point below forecasts. Additionally, the personal saving rate edged lower to 4.4%. Following the report, stock market futures slipped further into negative territory, and Treasury yields declined.
Market analysts noted the significance of the data. Chris Larkin, managing director of trading and investing at E-Trade Morgan Stanley, observed that “sticky inflation appeared to be a little less stuck this morning,” suggesting that the softer inflation figures might alleviate some market concerns following the Federal Reserve’s recent policy decisions. Earlier this week, the Fed reduced its benchmark interest rate by 0.25 percentage points to a range of 4.25%-4.5%, the lowest in two years. However, officials lowered their expectations for rate cuts in 2025, projecting just two reductions compared to the four anticipated in September.
Federal Reserve Chair Jerome Powell acknowledged that inflation is moving closer to the central bank’s target but emphasized the need for caution amid economic uncertainties. “It’s kind of common-sense thinking that when the path is uncertain, you go a little bit slower,” Powell explained. “It’s not unlike driving on a foggy night or walking into a dark room full of furniture—you just slow down.” Despite some progress, the Fed remains vigilant, adjusting its strategy to address inflation risks while navigating the complex economic landscape.