The US Federal Reserve's favourite measure of inflation is at its highest for a year

Chris Papadopoullos
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Fed Chair Janet Yellen Holds News Conference Following Federal Reserve Policy Meetings
The Federal Reserve will have to mull over whether to hike interest rates or not at its next meeting in March (Source: Getty)

The US central bank's favourite measure of inflation held steady in December, according to figures released today.

Prices, as measured by the personal consumption expenditures (PCE) index, dropped slightly in December, but were up 0.6 per cent year-on-year, the fastest rate for 12 months.

The Bureau of Economic Analysis said that core PCE, which excludes food and energy, was 1.4 per cent higher than in December 2015 – the same rate as in November and the joint highest since 2014.

The US Federal Reserve targets inflation at two per cent, and views core PCE as an important indicator of where inflation is likely to move in future.

While inflation is steady, financial market instability and a fall in expectations of inflation have led some to believe the Federal Reserve may not follow up its December interest rate hike with another one in March.

December's hike was the first in nearly a decade.

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