Here’s What the Latest Key Measure of Inflation Says

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What's Happening Today

Just ahead of the Christmas holiday, the Commerce Department released its latest Personal Consumption Expenditures (PCE) Price Index, an important gauge of inflation. The index rose 0.1% in November, down from October's 0.4% gain in another sign that inflation is easing. The index was up 5.5% from a year ago, slowing from 6.1% the month before. The core rate, which excludes more volatile food and energy prices, rose 0.2% last month and 4.7% from a year ago, slowing from 5% in October.

The PCE Price Index is the Federal Reserve's preferred measure of inflation because it tracks consumers' purchasing decisions more accurately than the Consumer Price Index (CPI). That's because the basket of goods and services making up the PCE Price Index is updated more frequently to reflect shifts in consumer preferences.

Consumers have been more optimistic about inflation in recent weeks after the CPI showed the annual rate of inflation declined by more than expected to an annual rate of 7.1% in November. Today's report supports that trend. With inflation continuing to ease, it raises the chance that the central bank will be more moderate with interest rate hikes at its next meeting at the end of January, though the rate of inflation remains well above the Fed's 2% target.

Stocks were flat to lower following the release. While there's no guarantee it will happen, markets could also get a nice little boost next week at the end of the year in what's known as a "Santa Claus Rally." There is no definitive explanation for why stocks tend to rise in the days between Christmas and New Year's, but it could potentially provide a holiday reprieve for investors after a tumultuous year for U.S. equity markets.

- Kristin

Programming Note: We'll be taking a short break between Dec. 24 and Dec. 26. Our next newsletter will be on Tuesday, Dec. 27. From us here at The Balance to you, we wish you a wonderful holiday season with family and friends!

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Term of the Day

Market Timing

Market timing is an investing strategy that involves making assumptions about what the price of a security will be at a certain time. Market timing can be either bearish or bullish, and it can be made with short-term or long-term movement in mind.

Market timing is generally considered a risky strategy. Correctly timing the market could come with a substantial payout, but the likelihood of repeated success with market timing is much lower than many other strategies for building wealth. As the saying goes, "Time in the market is better than timing the market."

Off the Charts

Continued spending in the face of higher prices has meant many people have been draining savings they built up during the pandemic. The savings rate dropped earlier this year to near its lowest level since 2005, according to data from the Commerce Department.