Inflation gauge favored by Fed showed price growth picked up in December

The Federal Reserve’s preferred inflation gauge showed prices rose as expected in December, and it remains above the central bank’s target level amid its ongoing efforts to wrestle down inflation.

The Commerce Department on Friday reported that the personal consumption expenditures (PCE) index was up 0.3% from the prior month and 2.6% on an annual basis. Those figures were in line with the estimates of economists polled by LSEG.

Core PCE, which excludes volatile food and energy prices, rose 0.2% for the month and increased 2.8% from a year ago, in line with estimates.

Federal Reserve policymakers are focusing on the PCE headline figure as they try to slow the pace of price increases to their target of 2%, though they view core data as a better indicator of inflation. Headline PCE ticked higher from an annual rate of 2.4% in November to 2.6% last month, while core PCE has been at 2.8% for three consecutive months.

Headline PCE showed prices for goods were flat in December, while prices for services rose by 3.8% from a year ago. Food prices were up 1.6% last month when compared with a year ago, while energy prices were down 1.1% during that period.

Wages and salaries were up 0.4% in December compared with the prior month – a slight deceleration after October and November both saw wage and salary growth of 0.5% in those months.

The personal savings rate as a percentage of disposable income was 3.8% in December. That metric declined from 4.3% in October to 4.1% in November and had been nearly 5% last spring.

This is a developing story. Please check back for updates.