Fed’s favored inflation gauge shows consumer prices remained elevated in November

The Federal Reserve’s preferred inflation gauge showed that consumer prices remained elevated in November, ahead of the central bank’s policy meeting next week.

The Commerce Department on Thursday reported that the personal consumption expenditures (PCE) index rose 0.2% in November on a monthly basis and is up 2.8% from last year. While the monthly figure was in line with the estimate of LSEG economists, the annual inflation reading was slightly hotter than the 2.7% economists anticipated.

Core PCE, which excludes volatile measurements of food and energy prices, was up 0.2% on a monthly basis and 2.8% year over year. Both of those figures were in line with the expectations of economists polled by LSEG.

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The report also included delayed PCE inflation data from October, which showed that both headline PCE and core PCE inflation were up 2.7% from a year ago in October.

Federal Reserve policymakers are focusing on the PCE headline figure as they try to bring inflation back to their long-run target of 2%, though they view core data as a better indicator of inflation. Headline PCE was in the 2.7% to 2.8% range from August through November, while core PCE was between 2.7% and 2.9% from May through November.

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Prices for goods rose 1.4% in November and that growth rate has been little changed since September, when the annual increase jumped to that level from 0.9% in August. Goods price growth was even lower earlier last year, remaining between 0.1% and 0.6% from May to July after a 0.3% contraction in April.

Durable goods were up 1.2% in November from the prior year, up from 1% in October and 0.9% in September.

Services prices were up 3.4% in November from the prior year, up slightly from 3.3% in October. Inflation from services ranged between 3.4% and 3.6% from April through September.

The personal savings rate as a percentage of disposable personal income was 3.5% in November, down from 3.7% in October. The savings rate was 5.5% in April but gradually declined over the rest of 2025. 

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Michael Pearce, chief U.S. economist at Oxford Economics, said that the combined PCE inflation report for October and November showed “disposable incomes stagnating but spending rising at a strong pace regardless.”

“The boost from rising stock market wealth is playing a key role supporting spending of high-income households, and helps explain the ap between spending and incomes. Personal incomes growth has slowed as the job market faltered late last year, and the personal saving rate fell to a three-year low in November,” Pearce explained. “That is not sustainable indefinitely, and we expect the pace of consumer spending to moderate a touch this year, even as real incomes growth picks up.”

Pearce added that, “One factor for caution in this report is that the lack of CPI inflation data for October forced the Bureau of Economic Analysis to interpolate missing data. Underreported inflation will boost spending in real terms in Q4, but will be a drag in Q2 when there will be a bump up in inflation.”

The PCE inflation data, along with the GDP report released earlier on Thursday, had little impact on the market’s expectations surrounding a potential interest rate cut at the Fed’s policy meeting next week. The probability of rates remaining at their current range of 3.5% to 3.75% was 95% on Thursday, little changed over the last week and up from 80.1% a month ago.