The Federal Reserve's preferred inflation gauge held steady again last month, but a jump in personal spending into year-end continued to suggest elevated pressures and a lack of last-mile progress from Chairman Jerome Powell and his colleagues on the interest-rate-setting committee.
The Bureau of Economic Analysis's PCE Price Index report for December, issued Friday, showed core prices rising at an annual rate of 2.8%, matching the November reading and Wall Street's consensus forecast.
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Core pressures, which strip away volatile food and energy prices, were up 0.2% on the month, compared with November's 0.1% gain and Wall Street's consensus estimate of 0.2%.
Markets focus on the core PCE inflation reading, which the Fed considers a more accurate representation of overall price pressures as it incorporates changes in consumer spending patterns.
The BEA's headline PCE inflation index quickened to an annual rate of 2.6%, matching Wall Street's estimate and slightly above the 2.4% pace recorded in November. The BEA said prices rose 0.3% on month, following a 0.1% reading in November.
The BEA also noted that personal incomes for December rose 0.4%, rising from the unrevised 0.3% pace in November. Spending accelerated 0.7% compared with the 0.4% advance in the prior month.
Inflation stays above Fed target
"While Friday's PCE print was in-line with expectations, the data shows that inflation remained elevated in December to end 2024, making it somewhat ironic that the Federal Reserve cut interest rates during the same month," said Clark Bellin, president and chief investment officer at Bellwether Wealth in Lincoln, Nebraska.
"With still stubborn inflation and a very strong economy and labor market, as the Federal Reserve suggested on Wednesday, more time is needed to allow inflation to settle down before the Fed can cut rates again," he added.
U.S. stocks were little changed following the data release, with futures indicating a 21-point opening bell gain for the S&P 500 and a 105-point advance for the Dow Jones Industrial Average. The tech-focused Nasdaq is called 140 points higher.
Benchmark 10-year note yields were 2 basis points higher at 4.539% following the data release, while 2-year notes rose 1 basis point to 4.218%.
The U.S. dollar index, which tracks the greenback against a basket of six global currencies, was marked 0.39% higher at 108.217.
Inflation remains stubbornly above the Fed's stated 2% target. The December Consumer Price Index was pegged at an annual rate of 2.9%, the highest of the year, even as domestic gasoline prices declined 1.1%.
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Core inflation, however, eased for the first time since July, measured at 3.2%, in what some analysts and investors saw as an early indication that the Fed could resume its policy easing into the new year.
December retail sales were also mixed, with headline activity rising 0.4% to a collective tally of $729.2 billion, while the closely tracked control-group number, which feeds into the government's GDP calculations, rose 0.7%.
Fed in 'no hurry' to cut rates: Powell
However, recent economic data suggest slowing growth momentum into the new year.
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Earlier this week, Federal Reserve Chairman Jerome Powell said the central bank was in "no hurry" to lower its benchmark lending rate, which it held at 4.375% following a two-day policy meeting in Washington.
He added that the economy remains "in quite a good place."
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Asked about the impact of President Donald Trump's tariff, tax and immigration policies, as well as his "demand" for lower interest rates, Powell would say only that the central bank would operate within the existing rules.
"We are, like others, we’re reviewing the orders and the associated details as they are made available," Powell said.
"And as has been our practice over many administrations, we are working to align our policies with the executive orders as appropriate and consistent with applicable law."
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