Inflation rose one-tenth of a percentage point to 2.8% for the year ending in November 2025, the Bureau of Labor Statistics reported Thursday in an update to the personal consumption expenditures index, which is the Federal Reserve’s preferred inflation gauge.
Thursday’s report is the last the Fed will receive before it votes on interest rates next week.
Thursday’s report includes data for both October and November, unusually, because the government shutdown prevented the scheduled release of key economic reports.
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The report shows that inflation is still proving stubborn, as voters continue to cite the cost of living and affordability as their main concerns. Rising inflation is bad for President Donald Trump‘s approval ratings and the political prospects of the Republican Party. It will also make it more difficult for the Fed to loosen monetary policy.
On a month-to-month basis, PCE inflation rose 0.2% in both October and November.
Core inflation, which strips out volatile food and energy prices, rose 2.8% on an annual basis in November. Core inflation was 0.2% on a monthly basis in November.
The Fed’s goal is 2% annual inflation, which it has not been able to achieve since inflation began taking off in early 2021.
While the PCE index is the Fed’s preferred gauge, it lags other inflation data, including the most closely watched inflation metric — the consumer price index. Inflation rose 2.7% the year ending in December, the Bureau of Labor Statistics reported last week in an update to the CPI.
The Fed hiked interest rates to historic levels in response to the mounting inflation of the past few years, but as inflation has moved to a healthier level, the central bank has begun slowly lowering its rate target.
While the Fed has been incrementally trimming interest rates over the past several months, many analysts expect the Fed to pause further rate cuts for the first part of 2026, given some underlying resilience in the labor market, coupled with too-high inflation.
The Trump administration, meanwhile, has been agitating for much deeper interest rate cuts, with the president repeatedly criticizing the Fed and Fed Chairman Jerome Powell for being “too late” in cutting rates and for not cutting interest rates more aggressively.
Despite declines in overall inflation in 2025, families across the country are still expressing discontent with prices. That has hurt Trump’s approval ratings and has made the economy one of the top issues heading into this year’s midterm elections.
Trump argues that lower interest rates will make life easier for consumers by making it less expensive to take out a mortgage or carry credit card debt. Many economists argue, though, that if interest rates move too low, it could reignite inflation and make the overall situation even worse.
The persistence of inflation has created a dilemma for the central bank. In most circumstances, it would not cut its interest rate target with inflation so high. But it also faces pressure to ease monetary policy because of signs that the labor market is weakening.
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The economy added 50,000 jobs in December, and the unemployment rate fell to 4.4%. But with revisions to the numbers for October and November, the three-month moving average of job gains was minus-22,000 in December.
Despite that, private-sector job growth has been better, averaging nearly 30,000 over the past three months — something Trump has touted.
