PCE Inflation November 2026 Forecast
- economy continues to expand,with consumer spending outpacing inflation despite a moderating labor market,according to recent data.
- The Bureau of Economic Analysis (BEA) reported that personal Consumption Expenditures (PCE), a key measure of inflation, increased in December 2023, indicating continued demand.Despite elevated inflation and...
- According to the BEA, real personal consumption expenditures increased 3.0 percent in the fourth quarter of 2023, after increasing 3.3 percent in the third.
The U.S. economy continues to expand,with consumer spending outpacing inflation despite a moderating labor market,according to recent data. Market expectations suggest the Federal Reserve will likely maintain its current policy stance at its upcoming meeting, anticipating at most two interest rate cuts in 2024.
Consumer spending and Economic Growth
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Consumer spending is currently the primary driver of U.S. economic growth. The Bureau of Economic Analysis (BEA) reported that personal Consumption Expenditures (PCE), a key measure of inflation, increased in December 2023, indicating continued demand.Despite elevated inflation and a slowdown in labor market gains, consumers have maintained robust spending habits.
According to the BEA, real personal consumption expenditures increased 3.0 percent in the fourth quarter of 2023, after increasing 3.3 percent in the third. This demonstrates continued economic activity despite headwinds.
Labor Market Conditions
The labor market is showing signs of cooling, but remains relatively strong. The Bureau of Labor Statistics (BLS) reported that the unemployment rate was 3.7% in December 2023, a slight increase from previous months. This indicates a moderation in job growth, but not a significant downturn.
Nonfarm payroll employment increased by 173,000 in december,below the average monthly gain of 223,000 over the prior 12 months. While this represents a slowdown, the labor market continues to add jobs at a pace exceeding historical averages.
Federal Reserve Policy Expectations
Markets anticipate the Federal Reserve will hold steady its federal funds rate at its next policy meeting. Following three interest rate cuts in 2023, futures traders currently project a maximum of two rate reductions in 2024. The CME FedWatch Tool reflects these expectations, showing a decreasing probability of aggressive rate cuts.
The Federal Reserve has been balancing the need to control inflation with the desire to maintain economic growth. Recent economic data, including strong consumer spending, suggests the economy is resilient enough to withstand a period of stable interest rates. The Fed’s decisions will also be influenced by geopolitical factors and the ongoing impact of previous rate adjustments.
Inflation Trends
Inflation remains a key concern for the Federal Reserve and consumers. The PCE price index, the Fed’s preferred measure of inflation, rose 2.6% year-over-year in December 2023. While this is down from a peak of 7.0% in June 2022, it remains above the Fed’s 2% target.
Core PCE, which excludes volatile food and energy prices, increased 2.9% over the same period. The persistence of core inflation suggests that underlying inflationary pressures remain in the economy.