Fed’s Preferred Inflation Measure Ticks Up in November

The Federal Reserve’s preferred inflation measure ticked up in November as consumer price pressures remained sticky toward the end of 2025.

On a monthly basis, the PCE price index rose by 0.2 percent.

Core PCE inflation, which excludes the volatile energy and food categories, also rose to 2.8 percent year over year, from 2.7 percent in the previous month.

From October to November, core inflation jumped 0.2 percent. All readings were in line with the market consensus.

Price pressures were largely seen in services, climbing 3.4 percent from 2024. Goods prices, meanwhile, rose at an annual pace of 1.4 percent.

Monetary policymakers concentrate on the PCE headline data as they try to restore inflation to the central bank’s 2 percent target. Fed officials place more weight on the PCE than the alternative consumer price index (CPI) because it is broader and updated more frequently.

Despite the increase, further progress on both the PCE and CPI inflation readings is expected in the coming reports.

The annual inflation rate in the January CPI report is forecast to be 2.3 percent, the regional central bank said.

These could be lagging indicators or outdated models. Real-time private-sector alternatives suggest consumer inflation is already firmly below the Fed’s 2 percent target.

Still, various central bankers fear that inflation remains too high and that the Fed needs to be cautious before moving forward with more interest rate cuts.

Last month, the Fed followed through on a quarter-point rate cut, voting 9–3, with two supporting no change, and one advocating for a larger cut.

Minutes from the December Federal Open Market Committee meeting revealed the decision could have gone either way.

“A few of those who supported lowering the policy rate at this meeting indicated the decision was finely balanced or that they could have supported keeping the target range unchanged,” the meeting summary released on Dec. 30, 2025, stated.

Personal income rose 0.3 percent—shy of the market estimate of 0.4 percent—reflecting the sixth consecutive monthly increase due to rising employment compensation. Personal dividend income also jumped 0.6 percent.

November’s transfer receipts, which include government social benefits such as Social Security and unemployment insurance, were little changed.

Consumer spending jumped 0.5 percent, in line with economists’ expectations. Growth was broad-based, with sizable increases in durable goods (0.7 percent), non-durable goods (0.7 percent), and services (0.4 percent).

Individuals saved less, with the personal saving rate sliding to 3.5 percent from 3.7 percent.

Consumer momentum continued in December following a lackluster November, say Bank of America Institute economists.

Total credit and debit card spending per household climbed 1.8 percent year over year in December, according to the bank’s data. But they were price-conscious in the home stretch of 2025.

“In fact, when making discretionary purchases, they favored smaller-ticket items rather than more expensive goods and services.”

Overall card spending increased 2.4 percent year over year for high-income households and 0.4 percent for low-income ones.

But shoppers on the lower end of the income scale were strategic during the Christmas shopping season.

“With cost-of-living issues still looming, in our view, it’s likely that consumers were able to stretch their dollars and shop smart by looking for deals,” the bank wrote.

“Lower-income households, in particular, made more frequent and smaller purchases in order to make the holiday season bright.”

Consumers have signaled more optimism to kick off 2026.

Low-income households largely fueled this month’s improvement in sentiment. High-income consumers were less confident about the U.S. economy.