Core PCE Remains Stubbornly elevated

The Gist

The November 2024 Personal Consumption Expenditures (PCE) price index rose by 0.1% month-over-month, bringing the year-over-year increase to 2.4%. Core PCE, which excludes volatile food and energy prices, also grew by 0.1% MoM and 2.8% YoY. The core MoM figure is encouraging; however, the YoY figure remains unchanged from the previous month.

The Color

The MoM PCE figure benefited from goods climbing slower than 0.1%, while services, food, and energy increased by 0.2%. The YoY core PCE figure remains stubborn as services saw a 3.8% hike; the core figure also did not benefit from the 4.0% decrease in energy prices, which drove the non-core PCE to a 2.4% YoY increase. 

The Takeaways

The November PCE report shows incremental progress in curbing inflation, with energy price declines helping to offset increases in other categories. However, the persistence in core inflation underscores the challenge facing the Fed in achieving its 2% target. The FOMC's Summary of Economic Projections signals the expectation for two rate cuts in 2025, setting up the Fed for a continued restrictive monetary policy for the time being.

You can reference the full report here.