December Personal Consumption Expenditures (PCE) data showed inflation came in slightly hotter than forecast. Headline inflation rose 0.4% for the month, pushing the annual rate up to 2.9%. Core inflation, which excludes food and energy, also increased 0.4%, bringing the annual core rate to 3%.
One factor driving inflation? Higher costs for video streaming services, which jumped 19.5% in December, added to monthly price pressures.
What’s the bottom line?
The Fed is still balancing risks. Inflation remains above its 2% target, arguing for a cautious approach on rate cuts, while signs of a cooling labor market could increase pressure to ease policy. Fed Chair Jerome Powell has emphasized there’s “no risk-free path.”
Looking ahead, annual inflation readings could improve in the coming months as higher readings from January (0.31%) and February (0.45%) of 2025 drop out of the 12-month calculation, if new monthly numbers are moderate.
