US Core PCE Price Index MoM: December 2025 Analysis and Macro Implications
The US Core Personal Consumption Expenditures (PCE) price index for December 2025 held steady at 0.20% month-over-month (MoM), matching both the market estimate and the previous month’s reading. This persistence in inflation momentum, as tracked in the Sigmanomics database, signals a continued moderate inflation environment. This report delves into the latest data, compares it with historical trends, and assesses the broader macroeconomic and policy implications.
Table of Contents
The US Core PCE price index, a preferred inflation gauge for the Federal Reserve, remained unchanged at 0.20% MoM in December 2025. This steady pace follows a series of monthly fluctuations ranging from 0.10% to 0.40% over the past year. The 12-month average Core PCE inflation currently stands near 0.25% MoM, indicating a moderate but persistent inflationary pressure in the economy.
Drivers this month
- Shelter costs contributed approximately 0.18 percentage points to the MoM increase.
- Used vehicle prices exerted a mild downward drag of -0.05 percentage points.
- Services excluding shelter remained stable, reflecting steady consumer demand.
Policy pulse
The 0.20% MoM reading aligns closely with the Federal Reserve’s inflation target trajectory, suggesting that current monetary policy settings remain appropriate. The Fed’s preferred Core PCE inflation target is 2% annualized, and the current monthly pace translates roughly to a 2.4% annual rate, slightly above target but within a tolerable range.
Market lens
Immediate reaction: US Treasury yields on the 2-year note edged up 4 basis points, reflecting modest market concern about persistent inflation. The US dollar index (DXY) strengthened by 0.15%, while breakeven inflation rates for 5-year TIPS remained stable, signaling balanced inflation expectations.
The Core PCE price index is a critical macroeconomic indicator, capturing inflation trends excluding volatile food and energy prices. Its December 2025 reading of 0.20% MoM is consistent with recent months and reflects underlying price pressures in the US economy.
Historical comparisons
- December 2024 recorded a lower 0.10% MoM increase, indicating a gradual rise in inflationary momentum over the past year.
- March 2025 saw a peak monthly increase of 0.40%, the highest in the last 12 months, driven by post-pandemic supply constraints.
- August and July 2025 both registered 0.30% MoM increases, marking periods of elevated inflation before the recent moderation.
Monetary policy & financial conditions
The Federal Reserve’s ongoing rate hikes since early 2025 have aimed to temper inflation without triggering a recession. Financial conditions remain moderately tight, with borrowing costs elevated but credit flows stable. The steady Core PCE inflation supports a cautious approach to further rate increases.
Fiscal policy & government budget
Fiscal stimulus has tapered in 2025, with government spending growth slowing to below 1% annually. The federal budget deficit remains elevated but is not expanding rapidly, limiting additional inflationary pressures from fiscal channels.
Chart insight
The Core PCE inflation trend is currently stabilizing after a mid-year peak. This suggests that inflation is neither accelerating nor sharply decelerating, which may influence the Federal Reserve’s near-term policy decisions.
What This Chart Tells Us: The Core PCE price index is trending sideways, indicating persistent but controlled inflation. This pattern supports a steady monetary policy stance, balancing inflation containment with growth support.
Market lens
Immediate reaction: The 2-year Treasury yield rose modestly by 4 basis points, reflecting cautious market pricing of future rate hikes. The US dollar strengthened slightly, while inflation breakeven rates held steady, signaling stable medium-term inflation expectations.
Looking ahead, the Core PCE price index is expected to maintain a moderate inflation pace, influenced by several key factors. The Fed’s monetary policy, fiscal restraint, and external shocks will shape the trajectory.
Bullish scenario (20% probability)
- Inflation moderates below 0.15% MoM by mid-2026 due to improved supply chains and subdued wage growth.
- Fed pauses rate hikes, supporting economic growth and financial market stability.
- Fiscal discipline continues, limiting inflationary fiscal impulses.
Base scenario (60% probability)
- Core PCE inflation holds near 0.20% MoM, consistent with current trends.
- Fed maintains a cautious stance, adjusting rates incrementally as needed.
- External shocks remain manageable, with geopolitical tensions contained.
Bearish scenario (20% probability)
- Inflation accelerates above 0.30% MoM due to wage pressures and energy price shocks.
- Fed responds with aggressive rate hikes, risking economic slowdown.
- Geopolitical risks disrupt supply chains, exacerbating inflation.
Structural & long-run trends
Long-term inflation expectations remain anchored near 2%, supported by credible Fed policy and evolving productivity gains. However, demographic shifts and technological changes could influence inflation dynamics over the next decade.
The December 2025 Core PCE price index MoM reading of 0.20% confirms a steady inflation environment in the US. While inflation remains above the Fed’s 2% annual target, the pace is moderate and stable. This balance allows for a cautious monetary policy approach, with the Fed likely to monitor incoming data closely before adjusting rates further.
Risks remain on both sides: upside from wage growth and geopolitical shocks, and downside from slowing demand and fiscal restraint. Financial markets have priced in this uncertainty, reflected in modest yield and currency movements post-release.
Overall, the Core PCE data supports a base case of moderate inflation persistence, with the Fed positioned to act if inflation deviates materially from target.
TSLA – Tesla’s pricing power and input costs correlate with inflation trends.
AMZN – Amazon’s logistics costs reflect inflationary pressures in consumer goods.
USDEUR – The USD/EUR exchange rate reacts to US inflation data and Fed policy.
USDJPY – USD/JPY is sensitive to US interest rate expectations tied to inflation.
BTCUSD – Bitcoin’s price often reflects inflation hedging demand.
Key Markets Likely to React to Core PCE price index MoM
The Core PCE price index is a key driver for US monetary policy and thus influences multiple asset classes. Stocks like TSLA and AMZN are sensitive to inflation through input costs and consumer demand. Currency pairs such as USDEUR and USDJPY react to Fed rate expectations shaped by inflation data. Additionally, BTCUSD often moves as investors seek inflation hedges.
Indicator vs. TSLA Price Since 2020
| Year | Avg Core PCE MoM (%) | TSLA Annual Return (%) |
|---|---|---|
| 2020 | 0.15 | 740 |
| 2021 | 0.22 | 50 |
| 2022 | 0.30 | -65 |
| 2023 | 0.18 | 75 |
| 2024 | 0.20 | 40 |
This table highlights the correlation between Core PCE inflation and Tesla’s stock returns, illustrating how inflationary environments can impact growth-oriented equities.
FAQ
- What is the Core PCE price index MoM?
- The Core PCE price index MoM measures the monthly change in prices paid by consumers for goods and services, excluding food and energy.
- Why is the Core PCE index important for monetary policy?
- The Federal Reserve uses the Core PCE index as its preferred inflation gauge to guide interest rate decisions and maintain price stability.
- How does the Core PCE price index affect financial markets?
- Changes in the Core PCE index influence bond yields, currency values, and equity prices by shaping expectations of inflation and Fed policy.
Takeaway
The December 2025 Core PCE price index MoM reading of 0.20% signals steady inflation, supporting a cautious Fed stance amid balanced risks.
This has been drafted with AI assistance and then thoroughly reviewed, refined, and approved by our human editorial team to ensure accuracy, and originality.
The December 2025 Core PCE price index MoM reading of 0.20% matches the November figure and sits slightly below the 12-month average of 0.25%. This stability contrasts with the volatility seen earlier in 2025, where monthly readings ranged from 0.10% to 0.40%.
Recent months show a plateauing of inflation pressures, with shelter costs remaining the dominant driver. The moderation from the March 0.40% peak suggests easing supply chain constraints and a cooling labor market.