Data released Friday by the Commerce Department showed the Fed’s preferred inflation gauge rose to 3 percent year over year in December, up from 2.8 percent the prior month.
The data show that the personal consumption expenditures (PCE) price index increased 0.4 percent in December and 2.9 percent from a year earlier. Core PCE, which does not include food and energy expenditures, also rose 0.4 percent monthly and 3 percent from last year.
The personal savings rate fell to 3.6 percent of disposable income in December, down from 3.7 percent in October and November, continuing a gradual decline from 4.9 percent in May 2025.
The data suggest progress toward the Federal Reserve’s 2 percent target has stalled. The Fed cut rates three times in 2025. Officials have signaled doubt that rates will ease further until inflation shows clearer progress toward that target.
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