The Personal Consumption Expenditures (PCE) Index, which is the Federal Reserve’s preferred gauge of inflation, rose to 2.8% in September on an annual basis. According to data from the Commerce Department released Dec. 5, core PCE rose 0.2% over the previous month. The report, delayed by the government shutdown, seemingly gives a further green light for the Federal Reserve to lower interest rates.

In addition, headline PCE increased 0.3% for the month, putting the annual inflation rate also at 2.8%, according to the department’s Bureau of Economic Analysis. Both readings met expectations, though the annual rate was up 0.1% from August.

Since April, economists have grappled with the complex effects of the Trump administration’s shifting tariff policies, with many warning they would drive up inflation. So far, the effects appear to be limited—though the uncertainty served as a drag on housing demand.

Commenting on the PCE reading on X (formerly Twitter), Gregory Daco, former chief economist at Oxford Economics, said the data shouldn’t get in the way of a rate cut this year.

“These inflation expectations level (sic) don’t contain much signal, but the direction of travel indicates a transitory ‘inflation’ shock from tariffs (not ‘price level’). Should reassure Fed policymakers regarding the inflation outlook,” he wrote.

Federal officials use the PCE price index as their relied on policy tool for inflation. While officials look at both measures, they generally consider core a stronger indicator of longer-term inflation trends.

Federal Reserve members meet next week, with a decision on the rate cut expected on Dec. 10.

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