The Fed’s preferred inflation gauge ticked slightly lower in January, matching Wall Street’s expectations and hitting the lowest level in three years.

The Personal Consumption Expenditures (PCE) index grew 2.4% year-over-year in January, a decline from last month’s 2.6% print. “Core” PCE, which excludes the volatile food and energy categories, came in at 2.8%, down from 2.9% in the month prior and in line with what economists surveyed by Bloomberg had expected.

Core PCE is the inflation measure mentioned most often by Fed Chair Jerome Powell.

Month-over-month, core PCE rose 0.4% in January, up from 0.1% in December.

The print comes at a crucial time in the inflation story after another reading on price increases, the Consumer Price Index (CPI), recently showed prices grew faster than expected in the month of January. The hotter-than-expected report sent stocks lower and prompted investors to shift their interest rate cut expectations.

Markets are now pricing in three interest rate cuts for 2024, in line with the Fed’s most recent forecast and down from a former consensus of six cuts seen back in December, per Bloomberg data. Before Thursday’s report, investors had placed a 58% chance on the first Fed interest rate cut coming in June.

The most recent minutes from the Federal Reserve’s January meeting showed most officials were concerned about the risks of “moving too quickly” when lowering interest rates. Largely, officials have expressed in recent commentary they want “greater confidence,” on inflation’s path downward.

Josh Schafer is a reporter for Yahoo Finance. Follow him on X @_joshschafer.

Click here for the latest stock market news and in-depth analysis, including events that move stocks

Read the latest financial and business news from Yahoo Finance