In a fortuitous — if ironic — development for a panel of technocrats who just marked up their core inflation forecasts aggressively, the Fed’s preferred measure of underlying price growth undershot estimates in data released Friday.

The MoM core PCE print, at just 0.115% unrounded, was the coolest since May. Economists collectively expected a 0.2% advance on the all-important readout.

The 12-month pace was 2.8%, a tenth lower than expected, and flat from the prior month’s annual rate.

Headline PCE price growth, at 0.1% MoM and 2.4% YoY, likewise came in soft. Economists were looking for 0.2% and 2.5% there.

The unexpectedly benign readings came at the end of a week during which the Fed projected just half the 2025 rate cuts they saw in September, a (relatively) hawkish bent predicated on concerns about stubborn core inflation.

In remarks to the press, Jerome Powell conceded the Committee’s inflation forecast for 2024 “kind of [fell] apart,” a remark which unnerved markets and underscored the notion that policymakers are now back to focusing on the inflation fight after three months obsessing over a labor market downturn that never materialized.

On Thursday, jobless claims for NFP survey week dropped sharply and the final estimate of Q3 GDP showed a stronger growth impulse driven by brisk consumption. Friday’s BEA release suggested nominal spending was slightly weaker-than-expected in November, rising 0.4% versus 0.5% expected. Real spending was in-line, though, rising 0.3% from October. Personal income grew 0.3% versus 0.4% expected. The saving rate was 4.4%.

Again, the PCE price updates were welcome news for the Fed, but it would be so typical if inflation suddenly inflected softer, just after the Committee revised their forecasts higher. One of the more under-appreciated risks for 2025 is softer growth, a weaker inflation impulse and a Fed which, due to acute PTSD, is reluctant to cut as aggressively as they should to put a floor under things.

Anyway, that’s getting (way) too far ahead. Even tomorrow’s not promised, after all. BMO’s Ian Lyngen summed up Friday’s BEA release. “Overall, it was a round of data that was consistent with the more benign inflation profile that appears to be emerging in Q4 [but] core inflation didn’t print low enough to prevent a January Fed pause,” he wrote.