United States prices increased in December, while consumer spending has risen, suggesting that the Federal Reserve could postpone interest rate cut for some time this year.
The PCE price index rose 0.3% last month, after an unused increase of 0.1% in November, the Department of Commerce said on Friday (31).
Economists consulted by Reuters were high of 0.3%. In 12 months to December, the PCE price index advanced 2.6%, after rising 2.4% in November.
Data were included in the fourth quarter gross domestic product report published on Thursday, which showed that price pressures have increased in the last three months of the year, with robust consumer spending.
The US Central Bank follows the PCE for monetary policy. On Wednesday, the Fed maintained its reference interest rate in the range of 4.25% to 4.50%, after reducing it by 100 base points since September, when it started its monetary loosening cycle.
The statement of the decision did not include the reference to the fact that inflation has “progressed” towards the target of 2% of the Fed. No interest on interest is expected before June.
Excluding volatile food and energy components, the PCE price index rose 0.2% last month after an unavailed increase of 0.1% in November.
In 12 months to December, the inflation core advanced 2.8%, after an increase of 2.8% in November.
The Fed predicted only two interest rates this year, below the four it had projected in September. This reflected the uncertainty about the economic impact of President Donald Trump’s plans for tax cuts, broad imports on imports, and a repression of immigration, which economists consider inflationary.
Fear of tariffs caused consumers to hurry to stock goods to avoid higher prices.
This helped boost consumer spending, which recorded the fastest growth pace in almost two years in the fourth quarter, supporting economic expansion.
Consumer spending, which account for more than two -thirds of US economic activity, increased 0.7% in December, after high revised 0.6% in November. Previously, it had been informed that spending had increased 0.4% in November.
The economy grew at an annualized rate of 2.3% in the fourth quarter, as the increase in consumer spending compensated for the weight of almost sold out and a strike on Boeing.
