Background on the Federal Reserve and Inflation Target
The Federal Reserve (Fed) prioritizes the Personal Consumption Expenditure (PCE) index over the Consumer Price Index (CPI) and aims for a 2% annual inflation rate.
Delayed Data Release
The release of November data was delayed due to a prolonged government shutdown in the previous year, which hampered the collection of economic information.
Recent Inflation Trends
The latest available data, from September, showed a 2.8% annual inflation rate based on the PCE index.
October data, also released with a delay due to public service closures, indicated a 2.7% PCE index rate, which slightly increased to 2.8% in November.
On a month-to-month basis, the price increase was 0.2% between October and November, as well as September and October, according to official data.
Federal Reserve’s Interest Rate Adjustments
The Fed had reduced interest rates three times in three meetings by the end of the previous year.
This easing, which aims to stimulate the economy by lowering credit costs, was motivated by signs of labor market exhaustion, with nearly nonexistent job creation.
Two Fed governors opposed the last rate cut, while others have made it clear they prefer keeping rates unchanged in the upcoming meeting despite strong pressure from President Donald Trump for another cut.
Market Expectations for the Upcoming Fed Meeting
Investors are nearly certain that the status quo will prevail when the Fed meets on January 28, according to the CME FedWatch tracking tool.
Key Questions and Answers
- What is the inflation rate in the US as of November 2025? The inflation rate remained steady at 2.8% annually, according to the PCE index.
- Why was the data release delayed? The release of November data was delayed due to a prolonged government shutdown in the previous year.
- What is the Federal Reserve’s inflation target? The Fed aims for a 2% annual inflation rate based on the PCE index.
- How many times did the Fed reduce interest rates in 2025? The Fed reduced interest rates three times by the end of 2025.
- What motivated the Fed’s interest rate cuts? The Fed’s rate cuts were motivated by signs of labor market exhaustion and nearly nonexistent job creation.
- What are market expectations for the January 2026 Fed meeting? Investors expect the Fed to maintain the current interest rates when they meet on January 28, 2026.
