Federal Reserve's Inflation Gauge Hits Yearly High In January – NMP Skip to main content

Federal Reserve's Inflation Gauge Hits Yearly High In January

Mar 01, 2024
The Federal Reserve cited “diminished” job gains as a primary factor in its decision not to raise interest rates at this time
News Director

Core PCE index's rise underlines inflation concerns and makes it unlikely the Fed will cut interest rates anytime soon.

January witnessed the swiftest rise in the Federal Reserve's key inflation measure in almost a year, shedding light on why officials are cautiously holding off on reducing interest rates. 

The core Personal Consumption Expenditures (PCE) Price Index, excluding food and energy for its volatility, saw a 0.4% increase from the previous month, according to data released from the U.S. Bureau of Economic Analysis. Year-over-year, it climbed by 2.8%, marking a more accurate reflection of inflation's core than broader indexes.

Consumer spending, adjusted for inflation, dipped for the first time in five months following a strong holiday season. Meanwhile, real disposable income remained stable. 

Federal Reserve officials have maintained that confidence in a sustained inflation slowdown is yet to be achieved, with Thursday's report likely solidifying this stance for the time being. They argue that it's premature to initiate interest rate cuts, opting instead to await further data for policy direction. 

Core PCE data, observed over a six-month annualized period, hit 2.5% in January, momentarily surpassing the Fed's 2% goal after falling below it in recent months. The report highlights services inflation, minus housing and energy, as particularly persistent, noting a 0.6% monthly increase, the highest since March 2022, with significant hikes in portfolio management and accommodation costs.

This PCE update is the final one before the Fed's March 19-20 meeting, where a rate cut is unlikely, shifting market expectations to possibly June for easing measures.

January's data highlighted a notable decline in goods spending, the largest in a year, particularly in vehicle purchases—the biggest drop since mid-2021. Conversely, end-of-2023 consumer spending revisions showed strong momentum entering the new year, with a slight uptick in fourth-quarter PCE inflation.

About the author
Christine Stuart is the news director at NMP.
Published
Mar 01, 2024
Mortgage Rates Edge Down To 7.32%, Offering Limited Pipeline Relief

The modest decline trims borrower payments, while year-end forecasts above 7% leave LOs focused on deals already close to working

Oct 23, 2026
More Homebuyer Assistance Programs Skip Income Caps, Accept Repeat Buyers

DPR’s Q3 report identifies 311 programs without income limits and 1,080 without first-time buyer requirements, though funded availability grew more slowly than the overall count

Oct 23, 2026
Home Affordability Gap Persists Even With 20% Down

ATTOM puts the income needed to afford a median-priced home at $90,191 — roughly $10,700 above average wages, despite lower prices

Oct 23, 2026
More Buyers Expect Higher Rates. Fewer Would Wait.

Veterans United’s survey finds less willingness to hold out for lower rates, but little change in purchase timelines

Oct 22, 2026
Mortgage Rate Lock-In: More High-Rate Loans, Few Signs Of A Thaw

With 30-year rates above 7% and nearly half of outstanding loans below 4%, originators face a stubborn obstacle to rebuilding repeat-buyer pipelines

Oct 22, 2026
Investor Homebuying Slows, Small Buyers Claim Biggest Share In 15 Years

Smaller investors accounted for 66.2% of investor purchases in the first half of 2026 and relied on cash much less often than mega-investors

Oct 22, 2026