US Inflation Rises to 2.6% in December as Fed Pauses Rate Cuts
The Federal Reserve's preferred inflation gauge shows persistent price pressures, with potential tariffs posing additional risks to the economic outlook.
- The Personal Consumption Expenditures (PCE) price index rose 2.6% year-over-year in December, up from 2.4% in November, while core PCE inflation held steady at 2.8%.
- The Federal Reserve paused interest rate cuts this week after three consecutive reductions, citing limited progress in lowering inflation toward its 2% target.
- Consumer spending surged by 0.7% in December, outpacing income growth, which rose by 0.4%, leading to a decline in the savings rate to 3.8%.
- Potential tariffs on imports from Canada and Mexico, proposed by President Trump, could further elevate inflationary pressures if implemented as early as this weekend.
- Fed officials remain cautious, emphasizing the need for clearer signs of inflation easing before considering further rate adjustments in 2025.
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