Key measure shows cooler inflation in January

• The backdrop, though, is jittery consumers and businesses that are dialing up inflation forecasts and downgrading expectations for the economy, as President Trump ramps up tariff plans.

State of play: The PCE price index is cooler than a separate inflation measure, the Consumer Price Index, suggested earlier this month.

• While CPI gets the most headlines, the PCE price index is the gauge preferred and watched most closely by Federal Reserve officials, because of its wide scope and comprehensive methodology.

By the numbers: The Personal Consumption Expenditures Price Index was up 2.5% for the 12 months ended in January, compared to 2.6% in December, as economists anticipated.

• The core inflation measure, excluding food and energy, was up 2.6% over the last 12 months, down from 2.8%.

Between the lines: The data also included a new look at consumer income and spending.

• Personal income surged 0.9% in January — up from 0.4% in the prior month, largely as a result of a cost-of-living adjustment to Social Security benefits. Adjusted for monthly inflation, personal income rose a still-healthy 0.6%.

• Spending, however, was weaker: personal consumption expenditures fell 0.2% in January after a 0.8% increase the prior month. It is the second recent indicator that suggested a pullback in consumer spending.

The bottom line: By one measure, inflation looked more encouraging for consumers and economic policymakers in January, with mild price increases.

• But attention has turned to what happens in the months ahead as the tariffs threatened by Trump take effect.

This is a developing story. Check back for updates.