Fed’s Preferred Inflation Gauge Shows Underlying Price Pressures Rising

Federal Reserve Board Chairman Jerome Powell looks on during a news conference following the announcement that the Federal Reserve raised interest rates by half a percentage point, at the Federal Reserve Building in Washington, on Dec. 14, 2022. Evelyn Hockstein/Reuters

A key inflation gauge closely tracked by the Federal Reserve showed that underlying price pressures increased in December while consumer spending declined, suggesting that inflationary pressures could take longer to dissipate and that the economy faces headwinds as shoppers retrench.

Government data released on Jan. 27 by the Department of Commerce showed that the so-called core Personal Consumption Expenditures (PCE) index rose 0.3 percent in December, a faster pace of price growth than the rate of 0.2 percent in November.