Economic data appears to be affirming that an interest rate is not coming for a few months as the Federal Reserve’s favorite inflation measure heated up despite a winter freeze, according to the latest data from the Bureau of Economic Analysis.

The Personal Consumption Expenditures (PCE) price index increased 0.4% in December, putting annual inflation at 2.9%. The PCE price index excluding food and energy—aka core inflation—also increased 0.4%, putting annual core inflation at 3%. Both inflation and core inflation saw increases from the 2.8% annual rise both measures observed in November.

Economists across the sphere agree this report came in higher than expectations.

In a post on X, Jason Furman, an Economics professor at Harvard, called the report a “strong finish to the year for core PCE inflation. And not ‘strong’ in a good way.”

“I continue to think we’re more like 2.5% inflation when you subtract imputed stuff, temporary tariff increases, etc., and that there is downward pressure on that,” he continued. “But it doesn’t feel good to end another year with 3% core PCE inflation. The Fed should focus on a bad inflation scenario.”

While inflation is up in other reports as well, such as the recent Consumer Price Index (CPI), it has hit some lows. The CPI saw inflation hit its lowest level since May, and core inflation its lowest level since March 2021. 

Economists have been predicting that the Fed will not be making a cut to interest rates for a couple months, possibly even until closer to the summer, following a spring thaw. This was supported by the recent Fed minutes, which suggested that inflation will have to fall for more interest rate cuts, as some voting members want to assess economic conditions before making any adjustments.

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