Fed’s Preferred Inflation Measure Ticks Up to 2.8%, Still Above Target

Inflation edged slightly further away from the Federal Reserve’s goal in November, even as the data came in exactly as markets expected. The latest figures show price growth remains sticky, keeping pressure on policymakers as they weigh future interest rate moves.

According to the U.S. Bureau of Economic Analysis, the personal consumption expenditures (PCE) price index rose at a 2.8% annual pace in November. That reading applied to both the headline figure and the core measure, which strips out food and energy. The result matched forecasts but stayed well above the Fed’s 2% inflation target.

October’s numbers were also revised and released at the same time due to delays caused by the government shutdown. Inflation for that month came in at 2.7% on both a headline and core basis.

Monthly Price Gains Remain Steady

On a month-to-month basis, prices rose 0.2% in both October and November. Goods and services each increased by 0.2% in November. Food prices were flat, while energy costs jumped 1.9% after falling the month before.

The PCE index is the Federal Reserve’s main inflation gauge because it captures changes in consumer behavior and spending patterns more broadly than other measures.

Income and Spending Show Consumer Strength

Alongside inflation data, the report offered a look at household finances. Personal income rose 0.1% in October and 0.3% in November, slightly below expectations for the latter month. Consumer spending, however, increased 0.5% in both months, showing that shoppers continue to spend despite higher prices.

The personal savings rate dipped to 3.5% in November, down from the previous month, suggesting households are saving less as they keep spending.

Economic Growth Still Looks Solid

The inflation report followed other signs of economic strength. The BEA said U.S. gross domestic product grew at a 4.4% annual pace in the third quarter, based on its final estimate. Meanwhile, jobless claims remain near their lowest levels in two years, according to the U.S. Department of Labor.

Together, the data points to an economy that is still expanding, with consumer demand running ahead of inflation even as the labor market cools slightly.

“The consumer continues to drive the U.S. economy,” said James McCann, senior economist at Edward Jones. “Spending remains strong despite last year’s slowdown in hiring and inflation that is still above target.”

What It Means for Fed Policy

Markets now widely expect the Federal Reserve to hold interest rates steady at its policy meeting next week. After three rate cuts in 2025, futures traders see at most two reductions in 2026 as officials assess lingering inflation pressure, past rate cuts, and global risks.

For now, inflation near 2.8% suggests progress has slowed. Prices are no longer surging, but they are not cooling fast enough to give the Fed full confidence that inflation is under control. For direct financing consultations or mortgage options for you visit 👉 Nadlan Capital Group.