Fed’s Preferred Inflation Measure Ticks Up to 2.8%, Still Above Target
Inflation moved a little further away from the Federal Reserve’s target in November, even though the data came in exactly as markets expected. The latest figures confirm a message policymakers have been repeating for months: inflation is easing, but not fast enough to declare victory.
According to the U.S. Bureau of Economic Analysis, the personal consumption expenditures, or PCE, price index rose at a 2.8% annual pace in November. That rate applied to both headline inflation and the core measure that excludes food and energy. While the result matched forecasts, it remained well above the Federal Reserve’s 2% target. October’s figures, released alongside November’s due to the government shutdown, were revised to 2.7% on both measures.
On a monthly basis, inflation showed little change. 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 nearly 2% after falling the month before. Because the PCE index reflects how consumers actually adjust their spending, it remains the Fed’s preferred inflation gauge—and one that continues to show stubborn pressure.
The report also highlighted ongoing consumer strength. Personal income rose modestly, while consumer spending increased a solid 0.5% in both months. At the same time, the savings rate slipped to 3.5%, suggesting households are spending more by saving less. As Edward Jones economist James McCann noted, the consumer continues to drive the U.S. economy despite inflation remaining above target.
That strength shows up elsewhere as well. Economic growth remains firm, and jobless claims are still near their lowest levels in two years. Taken together, the data points to an economy that is expanding, even as inflation cools only gradually.
For the Fed, the implication is caution. Markets expect policymakers to hold interest rates steady at their next meeting, with only limited cuts likely in 2026. Inflation around 2.8% suggests progress has slowed—prices aren’t surging, but they’re not cooling fast enough for the Fed to feel fully confident that inflation is under control.
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