Overview

• 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.