While the consumer price index is more well known, the PCE is used by the Fed in its forecasts. For now, the central bank is on pause as it holds interest rates steady while awaiting further economic data and sees the effects of President Donald Trump ’s proposed tariffs on imported goods.

Personal consumption expenditures inflation rose 0.3% in January for an annual rate of 2.5%, the Bureau of Economic Analysis said Friday. Excluding food and energy, the core PCE rate was 2.6% annually.

Inflation expectations vary by political affiliation, surveys show, but fears of inflation can be self-fulfilling.

The first report of the new year found that consumer sentiment had fallen, while inflation concerns had risen.

U.S. consumer spending unexpectedly fell in January, but a pick up in inflation could provide cover for the Federal Reserve to delay cutting interest rates for some time. Consumer spending, which accounts for more than two-thirds of U.

U.S. consumer spending unexpectedly fell in January while the annual increase in inflation slowed, supporting financial market expectations that the Federal Reserve would resume cutting interest rates in June.