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Key Fed measure shows core inflation at 2.8%, in line with expectations

Inflation closed out 2024 on a strong note, as a price gauge the Federal Reserve focuses on came in well above the central bank's target, the Commerce Department reported Friday.

The personal consumption expenditures price index increased 2.6% on a year-over-year basis in December, 0.2 percentage point higher than the November reading and in line with the Dow Jones estimate.

Excluding food and energy, core PCE registered a 2.8% reading, also meeting expectations and the same as the prior month. Though the Fed considers both readings, historically officials have seen core as the better gauge of long-run inflation.

On a monthly basis, headline PCE rose 0.3% while core increased 0.2%, both in line with forecasts as well.

The Fed targets annual inflation at 2%, a level the price gauge has not seen since February 2021.

Chicago Fed President Austan Goolsbee told CNBC that the PCE data was "even a little better than expected."

"I don't make too much of any one month, but you know, I've been saying that I felt like we are on path to 2%," he said during a "Squawk on the Street" interview. "I have comfort, I won't say overconfidence, but I have comfort that we're on that path."

Food prices increased just 0.2% on the month, but energy jumped 2.7%. Durable goods prices, which include items such as aircraft, appliances and electronics, showed deflation, falling 0.4%. Nondurables saw a 0.5% increase.

The report comes two days after the central bank voted unanimously to hold its key interest rate in a range between 4.25%-4.5%, taking a break after three consecutive cuts totaling a full percentage point.

"Inflation is still firmly above the Federal Reserve's 2% target. While Friday's PCE print was in-line with expectations, the data shows that

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