A new report out from the Commerce Department shows inflation cooled off slightly last month. The Personal Consumption Expenditures price index showed inflation rose 2.5% from the year before, down from December’s 2.

Inflation rose 2.5% over the year in January compared to 2.6% in December, marking the first decrease in four months.

Inflation in the Federal Reserve’s preferred price gauge eased in January after making steady increases throughout the fall. The personal consumption expenditures (PCE) price index increased by

The central bank’s preferred inflation measure, released on Friday, climbed 2.5 percent in January from a year earlier, slightly lower than the previous reading of 2.6 percent but still well above the Fed’s 2 percent target. On a monthly basis, prices increased 0.3 percent, in line with December’s pace.

Inflation decelerated but people are spending less and saving more as prices keep rising and wage growth slows. It’s worrying news for the Fed and economy.

The U.S. dollar edged lower on Friday following two straight days of gains, after a reading on inflation was largely as anticipated by investors while consumer spending unexpectedly fell. The Personal Consumption Expenditures (PCE) price index increased 0.

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.