Listen to the article
Inflation Edges Higher as Consumer Spending Remains Robust, Complicating Fed Rate Decision
The Federal Reserve’s preferred inflation measure increased slightly in November, suggesting price pressures remain persistent even as the economy continues to show strength, according to data released Thursday by the Commerce Department.
Consumer prices rose 2.8% in November compared to a year earlier, up from 2.7% in October. Core inflation, which excludes volatile food and energy categories and is closely watched by policymakers, also increased to 2.8% year-over-year, slightly above October’s 2.7% reading.
The report revealed that consumer spending climbed a solid 0.5% in November from the previous month, indicating robust economic activity as 2025 drew to a close. This spending data aligns with separate figures showing the economy expanded at an impressive 4.4% annual rate in the July-September quarter, the fastest growth in two years.
“Today’s data should reassure the Fed that the economy remains on a solid footing, despite a cooler labor market,” said James McCann, an economist at Edward Jones. “Indeed, there looks to be little urgency to cut rates at next week’s meeting.”
On a month-to-month basis, the inflation picture appears less concerning. Both headline and core inflation increased just 0.2% from October to November. If maintained, this monthly pace would gradually bring inflation closer to the Federal Reserve’s 2% target over time.
The mixed economic signals present a complex picture for Federal Reserve officials as they prepare for their upcoming policy meeting. While inflation remains above the central bank’s target, it has fallen significantly from its peak of over 9% in June 2022. However, the combination of steady consumer spending and stubborn inflation suggests the Fed may be reluctant to cut interest rates in the near term.
The economic landscape features notable contradictions. Despite strong overall growth, the labor market has shown signs of cooling. Hiring has slowed considerably even as the unemployment rate remains low, creating frustration for job seekers. This divergence between economic expansion and employment trends adds another layer of complexity to the Fed’s decision-making process.
The release of this economic data was delayed by the six-week government shutdown last fall, which temporarily halted various federal statistical reports. Despite this disruption, the figures provide valuable insights into the state of the economy heading into 2026.
Economists are closely watching these trends, as persistent inflation above the Fed’s target could prompt policymakers to maintain higher interest rates for longer than previously anticipated. Higher rates aim to cool economic activity by making borrowing more expensive, potentially slowing both consumer spending and business investment.
The robust consumer spending figures are particularly noteworthy given the elevated interest rate environment. American consumers have demonstrated resilience despite higher borrowing costs for mortgages, car loans, and credit cards. This spending power has helped sustain economic growth even as some sectors, particularly housing, have felt the impact of higher rates.
Looking ahead, economists will be monitoring whether this pattern of steady spending and above-target inflation continues into the new year. The data will be crucial in determining the Fed’s approach to interest rates, with significant implications for borrowers, investors, and the broader economy.
The Commerce Department’s report reinforces that while the economy has made substantial progress in taming the post-pandemic inflation surge, the path to the Fed’s 2% target remains challenging, with potential bumps along the way.
Fact Checker
Verify the accuracy of this article using The Disinformation Commission analysis and real-time sources.
12 Comments
Solid economic growth is great, but the elevated inflation is a concern. The Fed will have to walk a fine line to maintain price stability while supporting the expansion.
Absolutely, the Fed’s work is far from done. They’ll need to closely monitor the data and be prepared to adjust their policy stance as needed.
The strong consumer spending is an encouraging sign, but the inflation pressure is a concern. Curious to see how the Fed navigates this tricky economic environment.
Absolutely, the Fed has a fine line to walk here. They’ll need to strike the right balance between supporting growth and reining in inflation.
The mixed signals in the economy make the Fed’s job incredibly challenging. They’ll need to carefully weigh all the factors to determine the appropriate course of action.
Agreed, the Fed faces a complex set of tradeoffs. Their decision-making process will be crucial in navigating this delicate economic environment.
A 2.8% year-over-year increase in core inflation is quite elevated, even if it’s just a modest uptick from October. The Fed will need to stay vigilant in its fight against inflation.
I agree, the Fed can’t afford to let inflation become entrenched. Decisive action may be required to bring it back under control.
Interesting to see inflation ticking up even as consumer spending remains robust. Curious to see if the Fed will stick to its rate hike plans or adjust in response to the latest data.
The Fed will certainly have a tough decision ahead given the mixed signals in the economy. Maintaining price stability while supporting growth is a delicate balancing act.
The uptick in inflation, even as the economy remains robust, certainly complicates the Fed’s policy decisions. They’ll have to weigh all the data points carefully.
Indeed, the Fed will need to assess whether the latest inflation figures are a temporary blip or a more persistent trend that requires a stronger response.