Inflation: PCE index cools down in November, core PCE stronger-than-expected

Yahoo Finance Live anchors discuss the November reading for the Fed's preferred inflation measure.

Video transcript

AKIKO FUJITA: We did get some economic data, and this is personal consumption, PCE, personal consumption expenditure, personal spending, up 5 and 1/2% year on year in November. So that's a bit of a cooldown from the 6.1% we saw in October. Now the key here is the Fed's preferred gauge, which is core PCE. That actually came in stronger than expected.

So we're talking about a 4.7% increase year on year. 4.6% is what was expected. And that's probably why we're seeing the kind of reaction we said today, although December 23 not always the heaviest trading day. We should point out some improvements here in terms of what we got from the University of Michigan, the consumer sentiment index. That did rise slightly.

And Rachelle, this probably speaks to some of the economic data that we've been seeing that points to what core PCE, at least today, was stronger than expected. Overall, the trend has been moderating in terms of price increases. University of Michigan saying specifically sentiment remains in relatively downbeat at 15% below a year ago.

But consumers' increasingly negative attitudes have softened this month on the basis of easing pressures from inflation. Is it enough for the Fed to slow and sort of claw back their rate increases? Not necessarily, but that's at least a good sign if you're thinking about where things have been headed. Have we finally reached the peak? And certainly a lot of economists have argued we have.

RACHELLE AKUFFO: And that's the question. Every time this data comes out, we wonder, what is going to be that tipping point? What is enough data for the Fed? Obviously, they're looking at backwards-looking data. And you don't want the medicine to be taking hold when you go too far. The Fed doesn't seem to be worried about going too far. I know that they said it's worse, in fact, to take their foot off the gas preemptively and then make it worse and then be back in the same position again. But with every little bit of data, you get a bit more encouragement. But the Fed, at least at this point, still staying relatively hawkish.

AKIKO FUJITA: Yeah, they've always said it's not just one dataset. It's not just one month. They have to look at all things sort of combined. So we'll continue to monitor that.