What was the US PCE inflation rate in November 2025?

The headline Core PCE price index rose to 2.8% year-on-year in November, up slightly from 2.7% in October.

How did US consumer spending perform recently?

Consumer spending rose by 0.5% in November, matching the 0.5% growth seen in October, indicating resilient domestic demand.

How does sticky inflation affect Federal Reserve policy?

Persistent inflation above the 2% target, combined with strong spending, often leads to a 'higher for longer' interest rate stance, delaying potential rate cuts.

US PCE Inflation Hits 2.8% as Spending Remains Firm

U.S. consumer spending matched 0.5% gains in November as PCE inflation nudged higher to 2.8%, complicating the Fed's 2026 disinflation narrative.

The latest U.S. consumption and inflation prints delivered a familiar yet complex mix for global markets: the American consumer continues to drive growth, while disinflationary progress is proving both slow and uneven as we head deeper into 2026.

This data bundle reinforces a "soft landing with sticky services" regime. While it may not trigger an immediate policy shift in isolation, it significantly tightens the distribution of outcomes for the next two Federal Reserve meetings, making it increasingly difficult for markets to fade the reality of persistent inflation.

Headline PCE and Core Inflation: The Key Numbers

The headline figures suggest that while the US economy isn't "reheating" in a traditional sense, the cooling process has hit a stubborn plateau:

Consumer Spending: Rose 0.5% in November, matching October’s gain, signaling that demand is not "rolling over" in a broad-based way.
Headline PCE Price Index: Increased 0.2% month-on-month; the year-on-year rate moved up to 2.8% from 2.7%.
Core PCE (Ex-Food & Energy): Also rose 0.2% monthly, with the annual measure climbing to 2.8% from 2.7%.

Growth remains Consumption-Led

Two consecutive 0.5% monthly gains in spending are far from a recession signal. However, the composition of that growth is narrowing. Higher-income households appear to be cushioning the cycle, while rate-sensitive segments show less flexibility. When consumption remains robust but hiring fails to broaden, market dispersion increases, shifting the policy debate from point forecasting toward broader risk management.

The Sticky Inflation Signal

A 2.8% PCE reading is close enough to the target to maintain a constructive narrative, but just far enough above it to justify central bank caution. The market continues to price in a smooth glide-path back to 2%, but the data keeps printing a choppy descent. This "choppiness" often leads to sharp repricing in the front end of the yield curve when monthly data exceeds expectations.

Implications for the US Dollar and Interest Rates

A consumption print running at 0.5% month-on-month is difficult to square with aggressive easing narratives. In the current setup, inflation is drifting rather than collapsing, and the labor market remains steady. According to the Fed rate hold forecast, policy moves are becoming increasingly conditional on data quality.

This macro environment typically supports a "higher for longer" bias for interest rates. The US Dollar (USD) is likely to behave as a carry and real-yield instrument in risk-neutral environments, though it remains vulnerable to growth-scare headlines or shifts in policy credibility.

Cross-Asset Strategy: What to Watch

Over the next 2–4 weeks, traders should focus on the following dynamics:

Equities: May remain resilient as long as spending supports earnings, but rate-sensitive sectors face valuation headwinds.
Fixed Income: High-frequency spending indicators and wage proxies will command more attention than usual to filter out administrative data noise.
Commodities: Inflation hedges may stay bid if the market begins to price in a higher terminal rate for this cycle.

For a broader perspective on how these trends intersect with global trade, see our analysis on global growth and trade volatility.

Scenario Mapping for Q1 2026

We see three primary paths for the market balance in the coming months:

Base Case (60%): Spending remains steady while monthly inflation hovers near 0.2%. Policy stays on hold, and the first cut debate shifts further into the year.
Upside Inflation Risk (20%): Services inflation proves sticky (0.25–0.30% monthly). Front-end yields reprice higher, supporting the USD.
Downside Growth Risk (20%): Consumption fades as credit conditions tighten. This would lead to a duration rally and defensive USD positioning.

The dominant message is not a single headline, but the interaction between resilient demand and incomplete disinflation. This combination keeps the growth floor supported while ensuring that the volatility premium remains alive for FX and rate traders alike.