If Jerome Powell made a Christmas list, it’s safe to say a benign read on PCE prices landed near the top. Santa, obliging soul that he is, delivered, clearing the way for traders to push the dovish envelope. Or sell the news in a thin holiday market, whichever the case may be.

Core price growth was just 0.1% in November (0.058% unrounded), according to the last inflation update markets will see in 2023. That was below the 0.2% official consensus, but by Friday, traders were expecting a downside print.

On a YoY basis, the core PCE gauge rose 3.155%, cooler than expected and the slowest pace of annual core price growth since March of 2021, when inflation began to accelerate in earnest across the world’s largest economy.

The November figures came on the heels of an unexpected downward revision to the core price index in the Q3 GDP report.

The headline PCE gauge actually fell on a MoM basis. The 0.1% decline followed an unchanged reading for the prior month. On a YoY basis, headline PCE price growth was 2.6% last month.

Do note: The MoM decline on the headline gauge was the first of the pandemic era.

Needless to say, that’s a welcome development and serves to punctuate a run of generally soft macro data which, on balance (and to the deep chagrin of Fed critics), suggests soft landing odds are materially higher than anyone would’ve guessed 12 months ago.

While fully acknowledging the distinct possibility that we’ll look up six months from now and discover that in fact, reports of inflation’s demise were greatly exaggerated, and while conceding that the Fed’s pivot may be early and politically motivated, I’m compelled to tell you that for now (where that just means as we sit here discussing the issue today) this is over. The Fed “won,” with the scare quotes to denote that this is the quintessential example of a Pyrrhic victory.

Prices are higher for damn near everything than they were three years ago. And barring a depression that ushers in a period of across-the-board deflation, prices aren’t going back to pre-pandemic/pre-war levels. I can’t emphasize that enough, and it’s a macroeconomic (and thereby a human) tragedy. There’s no denying any of that. But for the purposes of markets, and again with emphasis on the here and now (so, not next month or next summer), many will consider the fight won. On a six-month annualized basis, core PCE price growth is running below 2%.

Friday’s data also showed that personal spending rose at a slower-than-expected 0.2% rate last month. Real spending rose 0.3%. Personal income was in line, rising 0.4%.

The figure above isn’t indicative of an economy in recession, but it’s not indicative of a runaway spending impulse either.

Importantly, consumer sentiment (and confidence) moved up dramatically in December, so it’s certainly possible that spending accelerated this month. That, in turn, could be indicative of inflationary “animal spirits.”

But, again, the realized inflation data that we have in hand, backward-looking though it is, makes the Fed’s case for a cautious pivot. And this month’s relatively robust sentiment/confidence data was accompanied by better readings on consumer inflation expectations.

Finally (and I assume this goes without saying), Friday’s price action is meaningless. The final read on University of Michigan sentiment is relevant, as is the new home sales update, but what’s not relevant is how traders, carbon-based and otherwise, behave the day before a long Christmas weekend.