Consumer prices rose 2.8% in November from a year earlier, according to the Federal Reserve’s preferred inflation gauge, while consumer spending climbed 0.5% during the month. The data points to a mostly strong economy with inflation still elevated above the Fed’s 2% target but sharply down from the four-decade peak of June 2022.
The report presents an economic puzzle for Federal Reserve policymakers: solid consumer activity and robust growth, yet inflation remains sticky and hiring has dramatically cooled. The figures suggest the central bank is unlikely to reduce interest rates when it meets next week and may hold rates steady through 2026 if growth remains strong.
The Federal Reserve’s preferred inflation gauge ticked upward in November, with consumer prices rising 2.8% from a year earlier, while Americans maintained strong spending despite persistent price pressures, the Commerce Department reported Thursday.
Core inflation, which excludes volatile food and energy costs, climbed to the same level, reaching 2.8% year-over-year. Both measures moved up only modestly on a monthly basis—0.2% each—a pace that, if sustained, would move inflation closer to the Federal Reserve’s 2% target.
Strong Spending, Faltering Hiring
Consumer spending grew 0.5% from October to November, a solid advance indicating sustained economic activity heading into 2026. Yet the data presents a puzzle for policymakers: robust spending and growth amid a labor market that has visibly deteriorated. Hiring has slowed dramatically even as the unemployment rate remained at 4.4%, leaving job-seekers frustrated.
Broader Economic Backdrop
Inflation has fallen sharply from the four-decade peak reached in June 2022, while the economy expanded at a 4.4% annual rate in the third quarter of 2025—the fastest growth in two years. Yet the weakening labor market suggests the economy may be cooling from those highs, creating tension for the Federal Reserve as it weighs its next move.
Interest Rate Outlook
The report indicated the central bank is unlikely to cut interest rates when it meets next week. Instead, economists expect the Fed will hold rates steady and possibly maintain that stance through 2026 if economic growth remains robust and inflation continues to run above its 2% target.
“Today’s data should reassure the Fed that the economy remains on a solid footing, despite a cooler labor market,” said James McCann, an economist at Edward Jones. “Indeed, there looks to be little urgency to cut rates at next week’s meeting, and the central bank could stay on hold for longer should growth remain robust into 2026 and inflation continue to run at above target rates.”
The Commerce Department delayed the report’s initial release due to a six-week government shutdown that occurred last fall. The data itself covers economic activity through November 2025.