Federal Reserve Faces Stubborn Inflation Ahead of Policy Meeting

Recent data from the Personal Consumption Expenditures (PCE) price index, the Federal Reserve's preferred inflation gauge, indicates that consumer prices rose by 2.8% in November 2025 compared to the previous year, up from a 2.7% increase in October. Monthly inflation figures showed a modest increase of 0.2% for both October and November. This data, delayed due to a government shutdown, suggests that inflation remains elevated, complicating the Federal Reserve's monetary policy decisions as it prepares for its upcoming meeting.

Inflation ticked up to 2.8% in November in Fed’s preferred gaugeThe Fed’s preferred gauge shows inflation at 2.8% in November, moving further away from targetFed's favored inflation gauge shows consumer prices remained elevated in NovemberThe Fed’s Preferred Inflation Gauge Ticked Up In NovemberThe Fed's Favorite Inflation Measure Stayed Hot In NovemberTwo Measures of Inflation: November 2025Consumer Prices Rose 2.8 Percent Through November, a Sign of Sticky Inflation

Despite the persistent inflation, consumer spending has shown resilience, climbing 0.5% in November. This increase aligns with a broader economic growth trend, as the U.S. economy expanded at an annual rate of 4.4% in the third quarter of 2025, marking the fastest growth in two years. However, the labor market has exhibited signs of cooling, with hiring slowing and job seekers facing challenges, even as the unemployment rate remains low.

Prices ticked up in November as Americans keep spending, a key inflation measure shows

The latest inflation figures suggest that the Federal Reserve is unlikely to implement further interest rate cuts at its next meeting. Economists, including James McCann from Edward Jones, believe that the data indicates a solid economic footing, reducing the urgency for rate adjustments. The central bank aims to maintain inflation around its 2% target, but the current rates exceed this goal, creating a dilemma for policymakers.

Fed’s preferred inflation gauge falling below policymakers’ forecast

Critics of the Federal Reserve's approach, including former President Donald Trump, have called for more aggressive interest rate cuts to alleviate financial pressures on consumers. Trump has publicly criticized Fed Chair Jerome Powell, arguing that lower rates would benefit households by reducing borrowing costs. However, some economists caution that excessive rate cuts could reignite inflation, complicating the economic landscape further.

Inflation ticked up to 2.8% in November in Fed’s preferred gauge

The recent inflation data has been impacted by the government shutdown, which hindered data collection and reporting. This delay has led to concerns about the accuracy of the reported figures, as some economists speculate that the shutdown may have skewed the data. The Bureau of Economic Analysis had to interpolate missing data, raising questions about the reliability of the inflation trends observed in October and November.

The Federal Reserve Is Still Dealing With The Shutdown's 'Data Fog'

Looking ahead, the Federal Reserve is expected to maintain its current interest rate range of 3.5% to 3.75% in light of the latest inflation data. As the central bank navigates the complexities of inflation and economic growth, it will closely monitor consumer spending and labor market conditions to inform its future policy decisions.

The Fed’s preferred gauge shows inflation at 2.8% in November, moving further away from target

• “Today’s data should reassure the Fed that the economy remains on a solid footing, despite a cooler labor market,” — James McCann, Economist at Edward Jones

Prices ticked up in November as Americans keep spending, a key inflation measure shows

• “Inflation has been defeated,” — Donald Trump, Former President

Fed’s preferred inflation gauge falling below policymakers’ forecast

• “Consumers are still spending, but they dipped heavily into savings during the shutdown,” — Heather Long, Economist at Navy Federal Credit Union

The Fed's Favorite Inflation Measure Stayed Hot In November

• “ Pearce added that, "One factor for caution in this report is that the lack of CPI inflation data for October forced the Bureau of Economic Analysis to interpolate missing data.” — Michael Pearce, Chief U.S. Economist at Oxford Economics

Fed's favored inflation gauge shows consumer prices remained elevated in November

This comprehensive overview highlights the ongoing challenges of inflation in the U.S. economy and the Federal Reserve's strategic considerations as it approaches its next policy meeting.

The Federal Reserve Is Still Dealing With The Shutdown's 'Data Fog'