US PCE inflation heats up in December

Reuters

Fri, February 20, 2026 at 10:50 PM GMT+9 2 min read

WASHINGTON, Feb 20 (Reuters) - Underlying U.S. inflation increased more than expected in December, and signs are pointing to a further acceleration in January, which would strengthen ‌expectations that the Federal Reserve would not cut interest rates before June.

The personal ‌consumption expenditures price index, excluding the volatile food and energy components, rose 0.4% after an unrevised 0.2% gain ​in November, the Commerce Department’s Bureau of Economic Analysis said on Friday. Economists polled by Reuters had forecast the so-called core PCE price index climbing 0.3%. In the 12 months through December, core PCE inflation advanced 3.0% after increasing 2.8% in November.

It is one of the measures tracked ‌by the U.S. central bank ⁠for its 2% inflation target. The data was included in the advance gross domestic product report for the fourth quarter published on Friday.

Though the ⁠Bureau of Labor Statistics’ Consumer Price Index report published last week showed a moderate increase in January, there was some stickiness in services inflation. Economists also noted a surge in legal services ​in January.

“This ​category, which the BLS does not publish, but ​can be backed out, registered a ‌12.0% month-on-month increase in January, which alone is worth about 10 basis points on core PCE inflation,” said Pooja Sriram, an economist at Barclays. “That said, this tends to be a very volatile category, with very little forward-looking inference.”

Economists estimated core PCE inflation could increase by as much as 0.4% on a monthly basis in January, which would translate to a ‌year-on-year advance of 3.1%.

Those forecasts could change after January’s ​Producer Price Index report next Friday. January’s PCE inflation ​data will be released on March ​13. The reports have been delayed by last year’s shutdown of the ‌government.

The PCE price index increased 0.4% in ​December after rising 0.2% ​in November. PCE inflation increased 2.9% year-on-year after gaining 2.8% in November.

The government also reported that consumer spending, which accounts for more than two-thirds of economic activity, rose ​0.4% in December after increasing ‌by the same margin in November. When adjusted for inflation, consumer spending gained ​0.1%, setting it on a slow growth trajectory heading into the first ​quarter.

(Reporting by Lucia Mutikani; Editing by Chizu Nomiyama)

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