Overall Personal Consumption Expenditures, the Fed’s favorite measure of consumer inflation, were -1.1% in in November and +1.4% year-over-year through November. Excluding volatile oil and food costs from the readings, “Core” PCE price index for November was 0% (also 0% for October) and +1.9% YOY through November.
The record 1.1% fall in November reflects not only moderating oil prices but also suggests a deflationary threat. The 1.4% year-over-year gain is the smallest since August 2002.
The Fed tends to look at Core PCE excluding food and energy prices because of the price volatility of these items, and the Fed’s zone for reasonable inflation is 1-2% per year. At 1.9%, the Core number is right in line within their comfort zone. The Fed’s next FOMC rate-setting meeting is January 27 & 28, although day-to-day crisis management takes precedence over any set meetings right now.