US Fed's inflation indicator softens to 2.9% in December, from 3.2% in November

By Ovunc Kutlu

ISTANBUL (AA) - The US Federal Reserve's preferred inflation indicator softened in December 2023 on an annual basis, according to Commerce Department figures released Friday.

The core personal consumption expenditures (PCE) price index rose 2.9% annually in December, down from the 3.2% year-on-year gain in November, and came in lower than the market expectation of 3%.

On a monthly basis, however, the index rose 0.2% in December, slightly accelerating from a 0.1% monthly increase in November, and came in line with market estimates.

In December, food prices increased 0.1% on a monthly basis and energy prices rose 0.3%, compared to the previous month.

Annually, food prices were up 1.5%, but energy prices decreased 2.2% in December 2023, compared to the same month of last year.

The PCE price index, which includes food and energy prices, annually rose 2.6% in December, following a 2.6% year-on-year gain in November, also coming in line with market estimates.

That index, on a monthly basis, rose 0.2% in December, following a 0.1% month-on-month decline in November, also in line with the market expectation.

The softening core PCE price index on an annual basis could allow the Fed to begin interest rate cuts earlier than anticipated this year.

The Fed has made a total of 11 interest rate increases between March 2022 and July 2023 to tame record inflation, carrying the federal funds rate to the 5.25%-5.5% target range – the highest in 22 years.

The central bank skipped four rate hikes last year, while its first monetary policy meeting of 2024 will conclude next Wednesday.