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The Federal Reserve’s preferred measurement of inflation showed the rate of price increases ticked a bit higher in October, which will likely reinforce the central bank’s cautious approach when it meets to decide on cutting interest rates next month.
The core Personal Consumption Expenditures price index, a key measure of inflation that tracks average change in prices paid by consumers for goods and services with the exception of food and energy, rose 2.8% year over year last month, according to the Commerce Department.
In September, core PCE rose 2.7%.
On a month-to-month basis, the core PCE rose 0.3%. Both the annualized rate and the month-over-month figure were in line with the consensus views among investors on Wall Street.
The overall PCE was up 2.3% — which is higher than the 2.1% rate that was reported in September.
Economists closely watch core prices because they typically provide a better read on where inflation is headed.
Inflation has fallen sharply since it peaked at 7% in mid-2022, according to the Fed’s preferred measure. Yet yearly core inflation has fluctuated between 2.6% and 2.8% since February.
Price increases have remained elevated in services, including apartment rents, restaurant meals, and car and home insurance.
Wednesday’s report also underscored that Americans’ incomes and spending remained healthy, a key reason the economy has kept growing this year despite widespread fears of a slowdown.
Incomes grew 0.6% from September to October, faster than economists had expected, while consumer spending rose by a solid 0.4% last month.
Solid growth and stubborn inflation, however, may keep Federal Reserve officials from cutting their key interest rate as quickly as they had signaled at their last meeting in September.
Many economists now expect they will reduce their rate by a quarter-point in December, then delay further cuts while gauging the impact of the reductions they made this year.
President-elect Donald Trump’s victory could also slow Fed rate cuts.
His proposals to cut taxes and reduce government regulation could spur faster growth, but could also overheat the economy and lift inflation.
And his threats to impose widespread tariffs, if carried out, would likely push up prices.
The Fed had signaled it would cut rates four times next year, but financial markets now expect just two reductions.
With Post wires
