November’s Personal Consumption Expenditures (PCE) showed that headline inflation rose 0.1% from October, while the year-over-year reading rose from 2.3% to 2.4%. Core PCE, the Fed’s preferred measure which strips out volatile food and energy prices, rose 0.1% monthly. The year-over-year reading held steady at 2.8%, remaining near the lowest level in over three years. All these readings were cooler than forecasts. Among the categories within the report, tame readings for both shelter and healthcare contributed to this favorable data, which was reported on Friday after the Fed’s meeting.
What’s the bottom line?
While annual Core PCE did not decline further toward the Fed’s 2% target, this was partly due to a lower replacement figure from November 2023, which was removed from the rolling 12-month calculation. Looking ahead, readings for January through April 2024 are higher comparisons, meaning progress lower toward the Fed’s 2% target may be easier next year when those figures are replaced.