PCE inflation November 2024:

Prices were slightly lower in November, but still higher than the Federal Reserve’s target when viewed from a year ago, according to a Commerce Department measure released Friday.

U personal consumption expenditure price indexthe Fed’s preferred inflation gauge, showed an increase of just 0.1% since October. The measure indicated inflation of 2.4% on an annual basis, still ahead of the Fed’s 2% target, but lower than the estimate of 2.5% by Dow Jones. The monthly reading was also 0.1 percentage point below the forecast.

Excluding food and energy, core PCE also increased 0.1% monthly and was 2.8% higher than a year ago, with both readings also 0.1 percentage points below the forecast. Fed officials generally consider the core reading to be a better gauge of long-term inflation trends because it excludes the volatile gas and food category.

The annual reading of core inflation was the same as in October, while the headline rate increased 0.1 percentage points.

The readings reflect a slight increase in the prices of goods and a 0.2% increase in the prices of services. Food and energy prices also posted 0.2% gains. On a 12-month basis, goods prices fell 0.4%, but services rose 3.8%. Food prices rose 1.4% while energy fell 4%.

Housing inflation, one of the stickiest components of inflation during its economic cycle, showed signs of cooling in November, rising only 0.2%.

The revenue and spending numbers in the release were also a bit light compared to expectations.

Personal income rose 0.3% after jumping 0.7% in October, falling short of estimates of 0.4%. On spending, personal expenses increased 0.4%, a tenth of a percentage point below the forecast.

The personal savings rate decreased to 4.4%.

Stock market futures held in negative territory after the report, while Treasury yields also slumped.

“Sticky inflation seemed to be a little less sticky this morning,” said Chris Larkin, managing director of trading and investments at E-Trade Morgan Stanley. “The Fed’s preferred inflation gauge came in lower than expected, which may take some of the edge off the market’s disappointment with the Fed’s interest rate announcement on Wednesday.”

The report comes just two days after the Fed cut its benchmark interest rate another quarter of a percentage point to a target range of 4.25%-4.5%, the lowest in two years. However, President Jerome Powell and his colleagues have reduced their expected path in 2025, now penciling in only two reductions compared to four indicated in September.

Although Powell said on Wednesday that inflation had “come very close” to the Fed’s target, he said the changes in the projected path for rate cuts reflected “inflation expectations will be higher” in the year ahead.

“It’s kind of common sense thinking that when the path is uncertain, you go a little slower,” Powell said. “It’s no different than driving on a foggy night or walking into a dark room full of furniture. Just slow down.”