US inflation data: Fed’s preferred gauge stays above target; January rate cut pause in focus

The US Federal Reserve’s preferred inflation measure remained elevated in November, reinforcing expectations that policymakers are likely to pause further interest rate cuts as they assess the impact of earlier easing and new trade-related pressures.

Data released by the US Department of Commerce on Thursday showed that the personal consumption expenditures (PCE) price index rose 2.8% year-on-year in November, marginally higher than 2.7% in October and still above the Fed’s long-term 2% inflation target, AFP reported. On a monthly basis, inflation rose 0.2% in both October and November.




Consumer spending continued to show resilience, increasing 0.5% month-on-month in both October and November, though economists cautioned that the momentum may be built on weakening fundamentals.

The data, which was delayed due to the prolonged US government shutdown in late 2025, is not the most current snapshot of the economy. Nevertheless, it is expected to factor into the Federal Reserve’s policy deliberations when it meets next week.

After three consecutive interest rate cuts in 2025, which brought the benchmark policy rate to a range of 3.50% to 3.75%, the central bank is widely expected to hold rates steady in January. Policymakers are seen preferring to evaluate the cumulative impact of earlier rate reductions, especially as President Donald Trump’s tariff measures begin filtering through supply chains.

The Fed continues to balance inflation risks against labour market conditions while adjusting borrowing costs. The persistence of inflation above target underscores the complexity of that task.

Excluding volatile food and energy prices, core PCE inflation rose 2.8% year-on-year in November, up from 2.7% in October, signalling limited progress toward disinflation.

Analysts at Pantheon Macroeconomics said inflation is still likely to undershoot the Fed’s own projections over time. This, they noted, is due to “the relatively low level of tariff revenues, negligible momentum in new rents, and signs that wage growth is set to slow further.”

However, they warned that despite “surprisingly resilient” consumer spending, the expansion appears fragile. “This strength looks built on increasingly shaky foundations,” economists Samuel Tombs and Oliver Allen said in a note, pointing to pressures on real after-tax incomes.

The report also showed that the personal saving rate slipped to 3.5% in November, down from 3.7% in October, a level Pantheon described as “unsustainably low.”