Overview of January 2026 PCE Report
This developing story on the January 2026 PCE inflation report highlights the Federal Reserve's preferred inflation gauge remaining stubbornly high as consumers face ongoing elevated price growth. The Commerce Department reported the personal consumption expenditures (PCE) index rose 0.3% on a monthly basis in January and is up 2.8% from a year ago. The monthly figure aligned with LSEG economist expectations, while the annual rate edged below the 2.9% estimate. Compared to December, headline PCE declined slightly from 2.9%, underscoring modest progress toward the Fed's 2% long-run target.
Core PCE and Fed Focus
Core PCE, excluding volatile food and energy prices, increased 0.4% from the prior month and 3.1% year-over-year, both in line with LSEG poll forecasts. Federal Reserve policymakers emphasize the headline PCE figure in their efforts to tame inflation to 2%, though they regard core data as a superior trend indicator. Core PCE rose from December's 3% reading, indicating underlying pressures persist.
Breakdown by Goods, Services, and Savings
Prices for goods rose 1.3% annually in January, down from 1.7% in December and lower than summer levels around 0.6% to 0.9%. Durable goods prices increased 2.2% year-over-year, up marginally from 2.1% last month, while nondurable goods advanced just 0.8%, the lowest since August and down from 1.6%. Services prices climbed 3.5% from a year ago, ticking up from the 3.4% rate seen September through December. The personal savings rate as a percentage of disposable income reached 4.5% in January, up from 4% in the prior quarter and the highest since July.
