A key measure of inflation in the U.S. showed that prices climbed again in December, suggesting the respite from rising prices seen in the prior month was short-lived.
The personal consumption expenditure price index rose 0.2 percent compared with the prior month, in-line with expectations and an increase from the negative 0.1 percent reading for November.
The core rate of PCE inflation, which excludes food and energy costs, rose 0.2 percent. That matched the consensus forecast and was slightly higher than the 0.1 percent increase seen in November.
Compared with a year ago, the PCE gauge shows overall prices up 2.6 percent, exactly the same as in November. The gauge of core prices is up 2.9 percent over the past 12 months, the first time in almost three years it has risen by less than three percent on an annual basis.
The Fed uses the PCE price index for its target of two percent inflation. The inflation rate has been running above the Fed’s target, indicating prices are rising faster than the Fed thinks is appropriate for a healthy economy, ever since March 2021.
At their December meeting, Fed officials forecast that year-over-year inflation would fall to 2.4 percent by the end of this year and core inflation would decline to 2.4 percent as well. The projections of Fed officials do not show prices returning to target until 2026.
