The U.S. Commerce Department reported on Friday that the delayed Personal Consumption Expenditures (PCE) price index rose slightly to 2.8% in the 12 months to September, up from 2.7% in August and in line with forecasts.
On a monthly basis, the PCE index increased 0.3%, matching both the previous month’s reading and economists’ estimates.
Excluding food and energy, core PCE rose 0.2% month-on-month, mirroring August’s pace and meeting expectations. The annual core reading eased to 2.8% from 2.9%, coming in slightly lower than anticipated.
The Federal Reserve closely monitors components of the PCE index when assessing inflation pressures in the U.S. economy. This latest release had been delayed due to the record-long federal government shutdown, which also postponed several other key data points typically used by Fed policymakers.
Markets widely expect the Fed to cut interest rates at its upcoming meeting on December 9–10 to support a weakening labor market. Signs that inflation is stabilizing—though still above the Fed’s 2% target—may reinforce expectations for a rate reduction.
CME FedWatch data shows an 87% probability of a quarter-point rate cut at the meeting.
Meanwhile, a University of Michigan survey, which was not affected by the shutdown, indicated that consumer sentiment improved slightly in early December. However, the report noted the gain remained within the margin of error.
Measures of expected personal finances remain well below levels seen at the start of 2025. While views on the labor market showed some improvement, they “remain relatively dismal,” said Joanne Hsu, director of the Surveys of Consumers.
Year-ahead inflation expectations dropped to 4.1% from 4.5% in November, marking the lowest level since January and the fourth straight monthly decline. Even so, short-term expectations remain above the 3.3% level recorded in January.
Hsu added that consumers see “modest improvements” compared to November, but overall sentiment remains subdued as households continue to feel the impact of high prices.
