The Federal Reserve is reportedly split when it comes to further interest rate cuts in 2026, operating with a “wait-and-see” attitude depending on how inflation moves during the year. The latest results from the Fed’s preferred gauge of inflation—the Bureau of Economic Analysis’s Personal Consumption Expenditure (PCE) report—showed inflation dipping then inching back up.

Delayed due to last year’s government shutdown, the PCE results tracked inflation across October and November 2025. Month-over-month, annual inflation increased by 0.2% in both October and November. Annually, both inflation and core inflation (excluding food and energy costs) increased 2.7% in October followed by a 2.8% increase in November. 

In September 2025, the PCE inflation index measured a 2.8% annual increase, which was slightly lower than expected. Looking at the index over a three-month period from September to November, annual inflation dropped slightly in October then rose again to where it was in September.

In October 2025, consumer spending increased by $98.6 billion, which ticked up further to $108.7 billion in November. Housing and utilities costs led the increase in consumer spending both months, though the spending increase on housing actually declined month-over-month. In October, $13.8 billion of the consumer spending increase was spent on housing and utilities, while $8.2 billion of the spending increase was spent on housing and utilities in November (i.e., a smaller number overall and a smaller fraction of the overall spending).

Consumers’ personal savings declined month-over-month. Personal savings dropped from $843.9 billion in October to $799.7 billion in November, with the rate of personal savings dropping from 3.7% in October to 3.5% in November. 

The Consumer Price Index (CPI), a narrower-in-scope index that relies on different and usually higher expenditure weights, found most recently that annual inflation had reached 2.7%, which was considered a middle of the road result. However this and the latest PCE inflation findings remain above the Federal Reserve’s target goal of 2% annual inflation.

For the full PCE index report, click here. 

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