A key inflation gauge closely tracked by the Federal Reserve showed that underlying price pressures increased in December while consumer spending declined, suggesting that inflationary pressures could take longer to dissipate and that the economy faces headwinds as shoppers retrench.
Government data released on Jan. 27 by the Department of Commerce showed that the so-called core Personal Consumption Expenditures (PCE) index rose 0.3 percent in December, a faster pace of price growth than the rate of 0.2 percent in November.
In year-over-year terms, core PCE slowed its pace in December, rising 4.4 percent compared to 4.7 percent in November.
The core PCE inflation measure, which excludes the volatile categories of food and energy, is the measure that the Fed relies on heavily when assessing inflation because excluding short-term price fluctuations from the overall inflation measure gives a clearer picture of underlying inflationary trends….