November 2025 PCE Inflation Keeps Fed Paused
November 2025 PCE inflation remained elevated as consumer spending rose, narrowing the path for Fed rate cuts before the Jan. 28 FOMC meeting.
KEY TAKEAWAYS
- November PCE inflation was 2.8% year-over-year and 0.2% month-over-month.
- Consumer spending rose 0.5% month-over-month, sustaining fourth-quarter momentum.
- Those readings narrow the near-term path for Fed rate cuts and favor a Jan. 28 hold.
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The Commerce Department’s November 2025 personal consumption expenditures (PCE) inflation report, released January 22, showed persistent price pressures alongside stronger consumer spending. This combination narrows the Federal Reserve’s path for rate cuts and reinforces expectations of a policy pause at the January 28 Federal Open Market Committee (FOMC) meeting.
Inflation Remains Elevated as Consumer Spending Grows
The Bureau of Economic Analysis reported that headline PCE inflation rose 2.8% year-over-year and 0.2% month-over-month in November 2025. Core PCE inflation, which excludes volatile food and energy prices, also increased 2.8% annually and 0.2% monthly. Consumer spending advanced 0.5% month-over-month, sustaining momentum in the fourth quarter.
These readings kept inflation notably above the Fed’s long-run 2.0% target and interrupted a recent modest downward trend.
Fed Policy Outlook Tightens
The Federal Reserve ended 2025 with its federal-funds target range at 3.50%–3.75% after three consecutive 25-basis-point cuts in the second half of the year. Chair Jerome Powell has signaled a pause in the easing cycle, emphasizing that further rate reductions will depend on incoming economic data.
The persistence of inflation alongside solid consumer spending has narrowed the near-term path for easing. Market pricing shows roughly a 5% chance of a rate cut at the January 28 FOMC meeting, with expectations leaning toward a hold.
