Fed’s Preferred Inflation Index Cooled In November, But Core Prices Remain Stubbornly Elevated

The Federal Reserve’s preferred inflation metric, the Personal Consumption Expenditures Price Index (PCE Price Index) excluding food and energy, cooled for the second month in a row in November, but remained well above the Fed’s target of 2%, according to the U.S. Commerce Department’s Bureau of Economic Analysis (BEA) Friday.

“Core prices,” which discount the more-volatile food and energy sectors,  rose 0.2% compared to October, and 4.7% compared to November, 2021, the BEA reported. Inflation on core prices has hovered between 4.7% and 5.3% through the year, hitting the low-point in May and July, according to archived BEA data.

When food and energy was factored in, inflation cooled to 5.5% in November, from 6.1% in October, reaching the lowest level since October 2021 when inflation was at 5.1%, the BEA reported. As measured by the more closely-watched Consumer Price Index, core price inflation continued to cool from 40-year highs to 6% year-over-year in November, while overall inflation moderated to 7.1%, according to the Bureau of Labor Statistics (BLS).

The growth in core PCE matched economists expectations, according to CNN, citing a poll by financial firm Refinitiv.

Real disposable personal income, an inflation-adjusted measure for the overall income Americans had to spend or save, grew by 0.3% in November from October, according to the BEA. In contrast, the BLS found that real average hourly earnings declined by roughly 0.5% from October to November.

Inflation-adjusted spending increased less than 0.1%, with spending on goods declining by 0.6% and services increasing 0.3%, the BEA reported. Unadjusted for inflation, retail sales declined by 0.6% in November after climbing 1.3% in October, according to the Commerce Department’s Census Bureau on Dec. 15.

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