Inflation Persists as Consumer Prices Climb 2.8% Through November
Consumer prices have shown a modest rise over the past two months. The Federal Reserve’s favored inflation measure, the Personal Consumption Expenditures (PCE) price index, indicated a 0.2% increase in October and an equal 0.2% rise in November. Year-over-year comparisons revealed a 2.7% increase in October and 2.8% in November.
Ongoing Inflationary Pressures
Despite being significantly lower than peaks experienced after the pandemic, inflation continues to affect households. Goods inflation, which had been decreasing since 2022, saw a resurgence after tariffs were placed in the spring of the previous year. This data is slightly dated, as a government shutdown last fall hindered critical data collection. Nonetheless, it will inform the Federal Reserve’s interest rate discussions in the upcoming week.
Market Expectations
- Traders predict no immediate interest rate cuts from the Fed.
- Economic growth has exceeded expectations, while unemployment remains stable.
Diane Swonk, chief economist at KPMG, highlighted that although affluent households drive economic growth, many lower-income individuals struggle with affordability. In November 2025, personal income grew by $80 billion, equating to a monthly increase of 0.3%. However, inflation-adjusted disposable personal income declined by a small margin in October before showing a slight recovery in November. This fluctuation underscores the impact of price pressures on household budgets.
Inflation Trends
Inflation has consistently stayed above the Federal Reserve’s 2% target since 2021. The White House aims to lower mortgage rates, but these rates are influenced by both inflation and Fed policy. Should inflation remain closer to 3% than 2%, Fed officials may hesitate to reduce interest rates.
Employment Landscape
As of December, national unemployment stands at a historically low 4.4%. However, net hiring has declined, affecting recent graduates and long-term unemployed individuals. Despite this, weekly jobless claims have remained low, indicating a stable job market.
Economic Outlook
Recent earnings reports from major banks demonstrated resilience amid global geopolitical tensions. Tax refunds, expected to be beneficial for many Americans due to recent legislative changes, are projected to rise by 26% or around $100 billion. This increase may predominantly impact middle- and higher-income households.
- Anticipated boosts in tax refunds may encourage increased spending.
- This spending could potentially trigger further inflationary pressures.
Additionally, the economic growth rate for the third quarter of 2025 has been adjusted to a 4.4% annualized pace. Analysts expect a steady growth trend extending into the fourth quarter, projecting a 3.5% growth rate, despite ongoing low consumer sentiment.
As the economic landscape continues to shift, the forthcoming decisions by the Federal Reserve will be critical in navigating inflationary challenges and supporting sustained growth.
