WASHINGTON (AP) — An inflation gauge that is closely watched by the Federal Reserve barely rose last month in a sign that price pressures cooled after two months of sharp gains.

Friday’s report from the government showed that prices rose just 0.1% from October to November. Excluding the volatile food and energy categories, prices also ticked up just 0.1%, after two months of outsize 0.3% gains.

The milder inflation figures arrived two days after Federal Reserve officials, led by Chair Jerome Powell, rocked financial markets by revealing that they now expect to cut their key interest rate just two times in 2025, down from four in their previous estimate. Stickier inflation, Powell said, “might be the single biggest factor” causing the central bank to reduce the number of rate cuts it envisions. Fewer Fed rate cuts would likely mean that mortgage rates and other consumer borrowing costs would remain elevated.

Yearly inflation was 2.4% in November, up from 2.3% in October and above the Fed’s 2% inflation target. Year-over-year “core” prices, which exclude volatile food and energy costs, were unchanged at 2.8%.

Inflation, according to the measure released Friday — the personal consumption expenditures price index — has plummeted from a peak of 7.2% in June 2022 to 2.1% in September. The Fed’s tool for fighting inflation is to steadily raise borrowing costs across the economy, which tends to cool spending and growth.

policymakers revised their expectation for inflation by the end of 2025 to 2.5%, unchanged from its current rate. The officials still expect core prices to fall by the end of next year, also to 2.5%.

“It’s way below where it was but we really want to see (more) progress on inflation,” Powell said at a news conference Wednesday. “As we think about further cuts, we’re going to be looking for progress.”

The Fed did cut its benchmark rate Wednesday by a quarter point to about 4.3%, after its larger-than-usual half-point rate cut in September and a quarter-point reduction in November.

The Fed tends to favor the PCE index over the better-known consumer price index. The PCE index tries to account for changes in how people shop when inflation jumps. It can capture, for example, when consumers switch from pricier national brands to cheaper store brands.

In general, the PCE index tends to show a lower inflation rate than CPI. In part, that’s because rents, which have been high, carry double the weight in the CPI.

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