The US Federal Reserve's preferred inflation gauge remained stubbornly elevated in November, according to data released by the US Department of Commerce on Thursday. This development reinforces growing expectations among economists and market watchers that policymakers are likely to pause any further interest rate cuts in the near term as they carefully assess the impact of earlier monetary easing and navigate new trade-related pressures.
Inflation Data Shows Persistent Pressure
The personal consumption expenditures (PCE) price index, which is closely monitored by the Federal Reserve, rose 2.8% year-on-year in November. This figure was marginally higher than the 2.7% recorded in October and remains significantly above the central bank's long-term inflation target of 2%. On a monthly basis, inflation increased by 0.2% in both October and November, indicating consistent upward pressure on prices.
Even when excluding the volatile components of food and energy prices, the core PCE inflation measure showed similar persistence. Core PCE inflation also rose 2.8% year-on-year in November, up from 2.7% in October, signalling limited progress toward the disinflation that policymakers have been seeking.
Consumer Spending Resilience and Underlying Weakness
Consumer spending continued to demonstrate surprising resilience in the face of economic headwinds, increasing by 0.5% month-on-month in both October and November. However, economists have cautioned that this apparent strength may be built on increasingly shaky foundations. Analysts at Pantheon Macroeconomics noted that despite "surprisingly resilient" consumer spending, the economic expansion appears fragile.
"This strength looks built on increasingly shaky foundations," economists Samuel Tombs and Oliver Allen said in a research note, pointing to mounting pressures on real after-tax incomes. The report also revealed that the personal saving rate slipped to 3.5% in November, down from 3.7% in October, a level that Pantheon described as "unsustainably low."
Federal Reserve Policy Implications
The inflation data, which was delayed due to the prolonged US government shutdown in late 2025, provides crucial context for the Federal Reserve's upcoming policy deliberations. After implementing three consecutive interest rate cuts in 2025 that brought the benchmark policy rate to a range of 3.50% to 3.75%, the central bank is now widely expected to hold rates steady at its January meeting.
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 and creating new inflationary pressures. The Federal Reserve continues to balance inflation risks against labour market conditions while adjusting borrowing costs, and the persistence of inflation above target underscores the complexity of that delicate task.
Analyst Perspectives on Inflation Trajectory
Analysts at Pantheon Macroeconomics offered a nuanced view of the inflation outlook, suggesting that inflation is still likely to undershoot the Federal Reserve's own projections over time. They attributed this expectation to "the relatively low level of tariff revenues, negligible momentum in new rents, and signs that wage growth is set to slow further."
This analysis highlights the challenging environment facing monetary policymakers as they attempt to steer the economy toward stable growth while containing price pressures. The combination of persistent inflation above target, resilient but potentially fragile consumer spending, and emerging trade-related uncertainties creates a complex policy landscape that will require careful navigation in the coming months.
