US Inflation At 2.9% – Inflation Not In Transit

The latest PCE inflation data for December 2025 once again confirms inflation is not collapsing the way politicians and central banks keep suggesting. The Federal Reserve’s preferred inflation gauge rose 0.4% for the month, with headline PCE running about 2.9% year-over-year and core PCE around 3.0%, remaining well above the Fed’s 2% target.

What this actually shows is that inflation has never been transitory. Despite aggressive monetary tightening and constant claims that inflation is coming down, the core trend is stabilizing near 3%, which historically signals price pressures rather than a temporary spike. Inflation does not simply disappear because interest rates are adjusted, rather, it declines when confidence and demand contract, and we are not seeing that type of collapse in consumer spending, which also rose alongside prices in December.

Governments and central banks focus on headline narratives, yet the core PCE, which excludes food and energy, is still running near 3%, indicating underlying inflationary pressure in the real economy. The political narrative continues to blame inflation on interest rates, tariffs, or isolated policy factors, but historically, inflation is far more tied to fiscal policy, deficits, and monetary expansion than any single variable. Even with inflation well below the 2022 peak, the data suggest the Fed is unlikely to rush into rate cuts because inflation progress has stalled rather than decisively reversed.

In reality, this confirms the broader trend I have outlined in Manipulating the World Economy: inflation peaks do not end in a straight line decline. They plateau, fluctuate, and remain above target far longer than policymakers expect. The real risk is not hyperinflation, but persistent inflation combined with slowing growth gives us the stagflationary undertone that emerges when governments expand spending while central banks attempt to maintain credibility.

When inflation stabilizes above target despite tightening, it signals a structural shift in the economy’s cost base, not a temporary anomaly. And that is precisely what this PCE data is quietly confirming beneath the surface.