This latest measure of inflation shows progress toward the Fed’s goal, in a positive sign for consumers

The last inflation snapshot for 2023 revealed that the Federal Reserve’s preferred price gauge didn’t budge last month, holding at 2.6% and wrapping up a year in which price hikes slowed while the economy remained strong.

The Personal Consumption Expenditures price index — the inflation gauge that the Fed uses as its target rate — was up 2.6% annually in December, closing out 2023 with a softer punch than the 5.4% gain a year prior, according to Commerce Department data released Friday. That’s 0.6 percentage points from the central bank’s goal of 2%.

Excluding energy and food, components that tend to be more volatile, the closely watched core PCE price index rose 2.9% annually, a slower pace than the 3.2% rate seen in November.

The core PCE gauge is at its lowest point since March 2021.

On a monthly basis, the headline PCE index rose 0.2%, a slight acceleration from the 0.1% drop seen in November when gas prices were tumbling. The core PCE index also rose by 0.2% from the prior month.

Consumer spending finished the year strong and was up 0.7% from November 2023, according to Friday’s report. Adjusting for inflation, spending was up 0.5%.

Economists had projected PCE would rise 2.6% for the 12 months ended in December and for consumer spending to grow 0.5% from the month before, according to FactSet estimates.

Americans’ personal incomes continued to grow in December, rising 0.3% from the month before. However, savings shrank during the key holiday shopping month, landing at 3.7% of disposable income, according to the report.

This story is developing and will be updated.