Federal Reserve's Preferred Inflation Gauge Marks First Slowdown In 4 Months (UPDATED)

by Erica Kollmann Benzinga Staff Writer

Zinger Key Points

The Personal Consumption Expenditures price index grows by 2.5% in January 2025 on a year-over-year basis.
Core PCE, excluding food and energy, increases 2.6% from the same period last year.
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Editor's note: This story has been updated with additional details.

The Federal Reserve's key inflation measure came in in-line with expectations on Friday, with headline PCE inflation marking its first slowdown in four months.

The Details: The Personal Consumption Expenditures price index grew by 2.5% in January 2025 on a year-over-year basis, decelerating from 2.6% in December, according to government data. The figure was in line with economists’ forecasts.

Core PCE, excluding food and energy, increased 2.6% from the same period last year.

On a monthly basis, the PCE index advanced 0.3%, accelerating from December’s 0.2% and in-line with forecasts.

On a monthly basis, core PCE rose 0.3%, slightly above the 0.2% gain recorded in the previous month, and also matching forecasts.

Food prices rose 0.3% in January, higher than 0.2% in December while cost of energy eased to 1.3% down from 2.4%.

Personal Income Soars: U.S. personal income marked the sharpest increase in one year, up 0.9% from December, well above market expectations of a 0.3% increase. The personal savings rate also jumped higher, rising to 4.6%.

The U.S. Bureau of Economic Analysis said the increase in compensation was led by private wages and salaries, which rose a total of $38 billion, with wages and salaries in goods-producing industries increasing $1.9 billion.

The data also pointed to increases in social security benefits resulting from the January cost-of-living adjustment and increases in personal dividend income, based on data from publicly traded companies.