PCE price index increases 0.2 in December
PCE price index rises 2.6 yearonyear
Core PCE price index gains 0.2; up 2.9 yearonyear
Consumer spending jumps 0.7; income rises 0.3

WASHINGTON, Jan 26 Reuters U.S. prices rose marginally in December, keeping the annual increase in inflation below 3 for a third straight month, bolstering expectations that the Federal Reserve will start cutting interest rates this year.

The timing of the anticipated rate cut is, however, uncertain as the report from the Commerce Department on Friday also showed consumer spending surging at the end of 2023 as Americans splurged over the holidays.

Financial markets have pushed the odds of a March rate cut to below 50 in a nod to the economy39;s continued resilience. The U.S. central bank is expected to keep its policy rate unchanged at the current 5.255.50 range at its meeting next week.

The inflation trajectory is improving, giving the Fed leeway to cut rates this year, said Jeffrey Roach, chief economist at LPL Financial in Charlotte, North Carolina. However, the Fed has further work to do and should not be tempted to declare 39;mission accomplished.39;

The personal consumption expenditures PCE price index increased 0.2 last month after an unrevised 0.1 drop in November, the Commerce Department39;s Bureau of Economic Analysis said. Food prices rose 0.1 and the cost of energy products increased 0.3.

In the 12 months through December, the PCE price index increased 2.6, matching…