U.S. PCE Price Index Slows Further in December, Boosting Rate Hike Expectations – Bloomberg

Last December, the U.S. Personal Consumption Expenditure (PCE) price index saw its slowest growth in more than a year, with both the headline index and the core index, which excludes food and energy, slowing further from a year earlier. Meanwhile, spending fell, fueling speculation that the Fed would slow its pace of rate hikes even further.

Federal Reserve Chairman Jerome Powell has said he believes the PCE core price index is a more accurate gauge of inflation trends. In December, both the core and headline price indices were almost entirely driven by the services sector. Goods prices continued to experience disinflation.

PCE decreased by 0.2% from the previous month. Market expectations were for a 0.2% decline. Inflation-adjusted real PCE decreased by 0.3% year-on-year. Spending on goods fell 0.9% in real terms. Real spending on services remained flat, not increasing for the first time since January 2022.

The data are yet another reminder that the worst of high inflation in decades is behind us, even as the Fed’s aggressive tightening moves affect the economy at large.