January's Personal Consumption Expenditures (PCE) index — the Federal Reserve's preferred measurement for inflation — saw headline data cool to an increase of 2.4% year-over-year. Core PCE, on the other hand, which excludes food and energy costs, rose by 2.8% and 0.4% month-over-month — both prints came in line with expert forecasts.

Yahoo Finance Markets Reporter Josh Schafer joins the Live show to break down the inflation data, falling to its lowest level since March 2021.

For more expert insight and the latest market action, click here to watch this full episode of Yahoo Finance Live.

Editor's note: This article was written by Luke Carberry Mogan.

Video Transcript

JOSH SCHAFER: So PCE out this morning, and the numbers coming in largely with what Wall Street had expected. Wall Street had expected this number like the CPI number to be perhaps a little bit hotter than people were hoping for maybe a month or so ago. So the PCE number year-over-year coming down to 2.4%. That's down from 2.6%. And then you're taking a look there on your screen at core PCE, which is really what the Fed looks at here that excludes volatile food and energy categories. Core PCE coming in at 2.8%.

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Now, a key number sitting on your screen right now that I think a lot of people are going to be talking about here, guys, is that month-over-month number, 0.4%. We haven't seen a month-over-month increase like that in a little while now. This is going to push the six-month annualized rate, which Chair Powell himself even recently talked about. And that's been a hot topic. That was below 2%. Well, the six-month annualized rate is now going to come above 2% which of course, is our goal here. It's going to be above 2% based on this.

Should know overall, it doesn't seem like the market is taking a big hit on this print because, again, it was largely in line with expectations when we think about the moves we've seen in Fed rate cuts over the last month. We went from people expecting six cuts a couple of months ago to people now expecting three cuts this year. We've sort of already had our big shift. So it doesn't seem like this was necessarily a massive market-moving event at least to the downside to start the day here.