Inflation finally dips below 3 percent as U.S. economy nears 'soft landing'
A key annual inflation metric fell below 3 percent in November, the latest sign that the U.S. is coming in for a rare soft landing from high price growth without a recession.
The personal consumption expenditures (PCE) price index dropped to 2.6 percent year-over-year in November, according to new data released Friday by the Bureau of Economic Analysis.
The October PCE price index was also revised down to a 2.9 percent annual gain.
The Federal Reserve uses the PCE price index as its main measure of inflation. The bank aims for 2 percent annual inflation when adjusting interest rates.
Excluding more volatile food and energy prices, however, so-called “core” PCE dropped to 3.2 percent annually in November from 3.4 percent in October.
The Fed held interest rates steady at its final monetary policy meeting of the year earlier this month, but signaled its aggressive spate of interest rate hikes may be over.
The central bank hiked interest rates to 22-year highs, from near zero percent to a range of 5.25 to 5.5 percent, over the past two years. All but three members of the Fed’s rate-setting panel forecasted at least two rate cuts in 2024 as prices have come down.
The latest PCE price index bolsters hopes that high rates will come down next year.
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