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Traffic prediction plays an important role in urban computing. However, many cities face data scarcity due to low levels of urban development. Although many approaches transfer knowledge from data-rich cities to data-scarce cities, the centralized training paradigm cannot uphold data privacy. For the sake of inter-city data privacy, Federated Learning has been used, which follows a decentralized training paradigm to enhance traffic knowledge of data-scarce cities. However, spatio-temporal data heterogeneity causes client drift, leading to unsatisfactory traffic prediction performance. In this work, we propose a novel personalized Federated learning method for Cross-city Traffic Prediction (pFedCTP). It learns traffic knowledge from multiple data-rich source cities and transfers the knowledge to a data-scarce target city while preserving inter-city data privacy. In the core of pFedCTP lies a Spatio-Temporal Neural Network (ST-Net) for clients to learn traffic representation. We decouple the ST-Net to learn space-independent traffic patterns to overcome cross-city spatial heterogeneity. Besides, pFedCTP adaptively interpolates the layer-wise global and local parameters to deal with temporal heterogeneity across cities. Extensive experiments on four real-world traffic datasets demonstrate significant advantages of pFedCTP over representative state-of-the-art methods.