Evelyn Reynolds

The PCE price index, the Fed’s preferred inflation gauge, showed an increase of just 0.1% from October and a 2.4% annual rate, both below expectations.
Excluding food and energy, core PCE also increased 0.1% monthly and was 2.8% higher from a year ago, with both readings being 0.1 percentage point below the forecast.
Personal income rose 0.3%, short of the 0.4% estimate. Personal expenditures increased 0.4%, one-tenth of a percentage point below the forecast.

Prices barely moved in November but still held higher than the Federal Reserve’s target when looked at from a year ago, according to a Commerce Department measure released Friday.
The personal consumption expenditures price index, the Fed’s preferred inflation gauge, showed an increase of just 0.1% from October. The measure indicated a 2.4% inflation rate on an annual basis, still ahead of the Fed’s 2% goal, but lower than the 2.5% estimate from Dow Jones. The monthly reading also was 0.1 percentage point below the forecast.

Excluding food and energy, core PCE also increased 0.1% monthly and was 2.8% higher from a year ago, with both readings also being 0.1 percentage point below the forecast. Fed officials generally consider the core reading to be a better gauge of long-run inflation trends as it excludes the volatile gas and groceries category.
The annual core inflation reading was the same as in October while the headline rate rose 0.1 percentage point.
The readings reflected little increase in goods prices and a 0.2% rise in services prices. Food and energy prices both posted 0.2% gains as well. On a 12-month basis, goods prices have fallen 0.4%, but services have risen 3.8%. Food prices were up 1.4% while energy fell 4%.
Housing inflation, one of the stickier components of inflation during his economic cycle, showed signs of cooling in November, rising just 0.2%.
Income and spending numbers in the release also were a bit light compared with expectations.

Personal income rose 0.3% after having jumped 0.7% in October, falling short of the 0.4% estimate. On spending, personal expenditures increased 0.4%, one-tenth of a percentage point below the forecast.
The personal saving rate edged lower to 4.4%.
Stock market futures held in negative territory after the report while Treasury yields also slumped.
“Sticky inflation appeared to be a little less stuck this morning,” said Chris Larkin, managing director of trading and investing at E-Trade Morgan Stanley. “The Fed’s preferred inflation gauge came in lower than expected, which may take some of the sting out of the market’s disappointment with the Fed’s interest rate announcement on Wednesday.”
The report comes just two days after the Fed cut its benchmark interest rate another quarter percentage point to a target range of 4.25%-4.5%, the lowest in two years. However, Chair Jerome Powell and his colleagues reduced their expected path in 2025, now penciling in just two reductions compared with four indicated in September.
Though Powell said Wednesday that inflation has “moved much closer” to the Fed’s goal, he said the changes in the projected path for rate cuts reflects “the expectation inflation will be higher” in the year ahead.
“It’s kind of common sense thinking that when the path is uncertain you go a little bit slower,” Powell said. “It’s not unlike driving on a foggy night or walking into a dark room full of furniture. You just slow down.”

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Russia’s central bank on Friday unexpectedly left its key interest rates unchanged at 21%, citing improved monetary tightness that had created the conditions to tame sky-high inflation.
Markets had widely expected the central bank to hike interest rates by another 200 basis on Friday, after taking such a step in October.
Russia’s consumer price index hit 8.9% in November on an annual basis, up from 8.5% in October.

MOSCOW, Russia: The Russian central bank has cut its key interest rate by 300 basis points for a third time since its emergency hike in late February, citing cooling inflation and a recovery in the ruble.
KIRILL Kudryavtsev | AFP | Getty Images

Russia’s central bank on Friday unexpectedly left its key interest rates unchanged at 21%, citing improved monetary tightness that had created the conditions to tame sky-high inflation.
“Monetary conditions tightened more significantly than envisaged by the October key rate decision,” the bank said, noting factors “autonomous” from its monetary policy.

“Given the notable increase in interest rates for borrowers and the cooling of credit activity, the achieved tightness of monetary conditions creates the necessary prerequisites for resuming disinflation processes and returning inflation to the target, despite the elevated current price growth and high domestic demand,” it added.
Markets had widely expected the central bank to hike interest rates by another 200 basis on Friday, after taking such a step in October amid an ongoing effort to subdue inflation stoked by the military costs of Moscow’s invasion of Ukraine and by Western sanctions against its key commodity exports.
The bank on Friday said it would assess the need for a key rate increase at its upcoming meeting in February. It currently forecasts annual inflation will decline to 4% in 2026 and remain at this target in the forward horizon.
Russia’s consumer price index is currently more than twice this rate — annual inflation hit 9.5% as of Dec. 16, the bank said Friday, noting persisting pressures, especially in the household and business sectors. The consumer price index hit 8.9% in November on an annual basis, up from 8.5% in October. The increase was largely driven by rising food prices, with the cost of milk and dairy products soaring this year.

Inflation an ‘alarming signal’

The hold to interest rates comes even after Russian President Vladimir Putin admitted during his Thursday annual Q&A session with Russian citizens that the nation’s inflation was problematic and that there was evidence of the economy overheating. He nevertheless stressed that Russia could still achieve 3.9%-4% of economic growth this year.

“Of course, inflation is such an alarming signal. Just yesterday, when I was preparing for today’s event, I spoke with the chairperson of the Central Bank, Elvira [Nabiullina] who told me that it was already somewhere around 9.3%. But wages have grown by 9% in real terms, I want to emphasize this — in real terms minus inflation — and the disposable income of the population has also grown,” he said, according to comments reported by Interfax and translated by Google.
The International Monetary Fund predicts Russia will notch 3.6% growth this year, before a deceleration to 1.3% growth in 2025.
The “sharp slowdown,” the IMF said, was envisaged “as private consumption and investment slow amid reduced tightness in the labor market and slower wage growth.”
“What we are seeing right now in the Russian economy, [is] that it is pushing against capacity constraint,” Alfred Kammer, director of the European Department at the IMF, said when the fund released its latest economic outlook in October.
“So we have a positive output gap, or you could put it differently — the Russian economy is overheating. What we are expecting for next year is simply also the impact that going over your supply capacity, you cannot maintain for very long. So we see an impact on moving into more normal territory there. And of course, that is supported by a tight monetary policy by the Central Bank of Russia,” he said.
“A tight monetary policy, in order to bring down inflation, slows down aggregate demand, and in 2025 will have these effects on GDP. That’s why we are seeing the slowdown in 2025,” Kammer added. More

The Bank of England on Thursday ended its last meeting of the year with a decision to leave interest rates unchanged, after U.K. inflation rose to an eight-month high.
Three members of the Monetary Policy Committee voted to reduce rates, while six were in favor of a hold. Economists polled by Reuters had forecast only one member would vote to cut.
BOE staff also downgraded their economic forecast for the fourth quarter of 2024, now predicting no growth, compared with the 0.3% expansion predicted in its November report.

The Bank of England pictured in December 2024.
Sopa Images | Lightrocket | Getty Images

LONDON — The Bank of England on Thursday ended its last meeting of the year with a decision to leave interest rates unchanged, after U.K. inflation rose to an eight-month high.
Analysts had widely expected a rate hold at the December meeting, as policymakers remain concerned with stubborn services inflation and wage growth.

The BOE has already taken its key rate from 5.25% to 4.75% this year in two quarter-percentage-point moves.
In a deviation from expectations, three members of the Monetary Policy Committee voted to reduce rates, while six were in favor of a hold. Economists polled by Reuters had forecast only one member would vote to cut.
Sterling pared gains against the U.S. dollar directly following the BOE announcement, trading 0.25% higher at 12:40 p.m. The greenback staged a broad rally on Wednesday after the U.S. Federal Reserve cut interest rates by a quarter point but signaled a more hawkish outlook for 2025. It gave up some gains on Thursday morning.

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In a statement, the BOE said the increase in U.K. headline inflation in November to 2.6% was slightly higher than previously expected, adding that services inflation remained “elevated.”
BOE staff also downgraded their economic forecast for the fourth quarter of 2024, now predicting no growth, compared with the 0.3% expansion predicted in its November report.

U.K. growth figures have come in weaker than expected in recent months, with the economy posting a surprise 0.1% contraction in October.
Money markets this week pared back bets on the pace of further trims next year after the publication of data on inflation and summer wage growth, and are now pricing in roughly 50 basis points of upcoming cuts, down from an outlook of around 70 basis points’ worth of cuts on Monday.

‘More divided than ever’

“The split vote decision and the dovish tone of the minutes suggest that a February interest rate cut remains very much in play, if not yet a done deal,” Suren Thiru, economics director at the Institute of Chartered Accountants in England and Wales, said in emailed comments.
“The Bank of England risks backing itself into a corner over the pace of policy loosening because, with inflation likely to drift higher, the timing of future interest rate cuts could become increasingly complex, especially if stagflation fears become reality.”

Matthew Ryan, head of market strategy at Ebury, said BOE officials appeared “more divided than ever” on the path ahead for rates, with doves focusing on the fragile U.K. economy, while hawks favored a gradual approach due to the recent uptick in inflation. The recent U.K. budget and the threat of escalating trade tensions under U.S. President Donald Trump next year will also be viewed as inflationary risks, Ryan said.
U.K. borrowing costs were higher following the Thursday announcement, with the yield on 10-year government bonds up 4 basis points at 4.596%. Gilt yields have been in focus this week, as the U.K.’s risk premium over that of Germany reached its highest level since 1990. German bond yields were also up on Thursday, with the yield on 10-year bunds — the euro zone benchmark — jumping by 5 basis points.
The European Central Bank last week cut rates by a quarter point in its fourth such move of the year, signaling a firm intention to enact more monetary easing in 2025. More