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Core PCE Inflation Hits 2.7% in Q4 2025, Exceeding Fed Target

3/22/2026

30 4 Full Breakdown

Summary

Story summary

Core PCE inflation for Q4 2025 was 2.7%, above the Fed's 2% target.
Inflation peaked at 5.9% in Q3 2022 and stayed between 2.5% and 3.0% since Q3 2023.
A model highlights housing and food as inflation drivers, excluded from core measures.
Housing inflation fell to 4% in Q4 2025, while food inflation rose to 2.2%.
The interaction of goods and services inflation and tariff impacts complicates policy, signaling persistent inflation.

History

Historical Context

In 2022, U.S. inflation surged to 5.9%, prompting the Federal Reserve to reassess its monetary policy amid rising costs reminiscent of the 1970s stagflation. Contributing factors included expansionary fiscal measures post-COVID-19 and global supply chain disruptions exacerbated by the 2022 Russian invasion of Ukraine. These inflationary pressures underscore the challenges of maintaining economic stability in a fluctuating market.

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Story summary

Core PCE inflation for Q4 2025 was 2.7%, above the Fed's 2% target.
Inflation peaked at 5.9% in Q3 2022 and stayed between 2.5% and 3.0% since Q3 2023.
A model highlights housing and food as inflation drivers, excluded from core measures.
Housing inflation fell to 4% in Q4 2025, while food inflation rose to 2.2%.
The interaction of goods and services inflation and tariff impacts complicates policy, signaling persistent inflation.

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