The report is directionally welcome news for President Donald Trump, as it shows that inflation is easing. The cost of living and affordability have been top complaints among voters.

It also could lead Fed officials to move more quickly toward cutting interest rates, in order to boost economic activity.

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On a month-to-month basis, PCE inflation rose 0.3%.

Core inflation, which strips out volatile food and energy prices, rose a tenth of a percentage point to 3.1% for the year.

The Fed’s goal is 2% annual inflation, which the Fed hasn’t been able to achieve since inflation began taking off in early 2021.

“Inflation is still too hot to touch and rate cuts will have to wait until the price pressures cool down a little regardless of what the President is calling for,” said Chris Rupkey, chief economist at FWDBONDS. “Economy is cool and inflation is hot.”

While the PCE index is the Fed’s preferred gauge, it lags other inflation data, including the most closely watched inflation metric — the consumer price index. Inflation held steady at 2.4% for the year ending in February, according to the latest data released on Wednesday.

The latest inflation numbers don’t reflect the increase in gasoline prices brought on by the war with Iran. Gas prices have lurched up nearly 22% in the past month alone, according to AAA.

The central bank voted to hold interest rates steady in January, pausing after cutting interest rates in the previous three meetings.

While the Fed continues to monitor slowdowns in the labor market, it remains attentive to the fact that inflation is still running above its 2% target. The pause comes despite pressure from the White House for the central bank to cut rates.

The Fed’s next meeting is set for next week, and it will make a decision on whether to hold its rate target at a range of 3.50% to 3.75%.

The Fed is also closely tracking employment data, particularly given that there has been a gradual decline in job growth over the past year.

The economy shed 92,000 jobs in February, and the unemployment rate edged up to 4.4%, the Bureau of Labor Statistics said last Friday. That was a big surprise and not good news for Trump and the economy.

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Democrats are trying to seize on economic discontent in order to gain back control of one or both chambers of Congress in the November midterm election. If they are able to win, it could hamstring the administration during the second half of Trump’s second term.

Meanwhile, Republicans are focused on bright spots in the economy. The Senate passed bipartisan housing legislation on Thursday that both parties hope can help with housing affordability, although the bill faces some challenges in the House.