A gauge the Federal Reserve prefers to measure inflation rose 4.9% from a year ago, the biggest gain going back to September 1983, the Commerce Department reported Friday.

The core personal consumption expenditures price index excluding food and energy was slightly more than the 4.8% Dow Jones estimate and ahead of the 4.7% pace in November. The monthly gain of 0.5% was in line with expectations.

Along with the inflation numbers, personal income rose 0.3% for the month, a touch lower than the 0.4% estimate. Consumer spending declined 0.6%, less than the 0.7% estimate.

A separate Labor Department data point that Fed officials also watch closely showed that total compensation costs for civilian workers increased 4% over the past 12 months. That is the fastest pace in history for the employment cost index, a data set that goes back to the beginning of 2002.

However, the seasonally adjusted quarterly increase of 1% was less than the 1.2% forecast, putting some balm on fears of a wage price inflationary spiral.

The numbers come as rampant inflation is pushing the Fed into an aggressive pace of policy tightening.

Earlier this week, central bank officials indicated they are likely to begin raising interest rates as soon as March. Market pricing is pointing to five quarter-percentage point increases this year for benchmark short-term borrowing rates, which have been anchored near zero since the beginning of the Covid pandemic in early 2020.

Source: CNBC

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