Fed's Core PCE Inflation Holds at 2.8% in November, Income Growth Lags

The Personal Consumption Expenditures (PCE) price index rose 2.8% year-over-year in November, up from 2.7% in October, according to the Bureau of Economic Analysis. Core PCE, excluding food and energy, also increased 2.8%, matching prior months and remaining above the Federal Reserve’s 2% target. The report, delayed due to a government shutdown in October and November, showed inflation-adjusted disposable income fell 0.1% in October before rising 0.1% in November. The savings rate dropped to 3.5% in November, the lowest since 2022, amid ongoing household financial stress. The data reflects persistent inflation pressures despite a recent decline in consumer spending power, particularly for middle- and lower-income households. Economists note the shutdown likely distorted survey results, with consumers drawing down savings during the period. The savings rate has declined monthly since April, coinciding with tariff announcements that contributed to economic uncertainty and higher prices. While core PCE remains a key Fed benchmark, the delayed release may reduce its immediate impact on policy decisions. Markets expect the Fed to hold rates steady at its January 30 meeting, balancing inflation control against weakening labor market trends.