The latest reading of the Fed's preferred inflation gauge showed inflation eased in May as prices increased at their slowest pace since March 2021.
The core Personal Consumption Expenditures (PCE) index, which strips out the cost of food and energy and is closely watched by the Federal Reserve, rose 0.1 % in May from the prior month, in line with Wall Street's expectations and slower than the 0.3% increase seen in April.
Core PCE was up 2.6% over the prior year in May, in line with estimates. May's reading marked the slowest annual gain in more than three years.
BMO senior economist Jennifer Lee told Yahoo Finance that May's inflation reading was "probably the best one could expect."
"It certainly helps the Fed, [and] gives them a little bit more comfort on their path to starting to ease policy," Lee said.
The report follows other promising May inflation prints. The most recent reading of the Consumer Price Index (CPI) showed core prices climbed 0.2% from the prior month, lower than economists' estimates.
The recent prints have consumers feeling better about inflation's path. The latest University of Michigan Consumer Sentiment for June, also released on Friday, showed consumers expect 3% inflation in the year ahead, lower than the 3.3% they expected in May's survey.
Read more: Inflation fever breaking? Price hikes on everyday expenses finally ease up.
But after surprisingly hot inflation readings to start the year, Federal Reserve officials have remained cautious about inflation's trend, noting in their most recent policy statement that it won't be appropriate to cut rates until they have "greater confidence" in inflation's path.
"There has been modest further progress toward our inflation objective," Fed Chair Jerome Powell said during a press conference on June 12. "We will need to see more good data to bolster our confidence that inflation is moving sustainably toward 2%."
Josh Schafer is a reporter for Yahoo Finance. Follow him on X @_joshschafer.
Click here for in-depth analysis of the latest stock market news and events moving stock prices.
Read the latest financial and business news from Yahoo Finance