WASHINGTON (AP) — The Federal Reserve’s preferred inflation gauge cooled further last month even as the economy kept growing briskly, a trend sure to be welcomed at the White House as President Joe Biden seeks re-election in a race that could pivot on his economic stewardship.

Friday’s government report showed that prices rose just 0.2% from November to December, a pace consistent with pre-pandemic levels and barely above the Fed’s 2% annual target. Measured from a year earlier, prices increased 2.6%.

Excluding volatile food and energy costs, so-called “core” prices rose just 0.2% from month to month and 2.9% from a year earlier — the smallest such rise since March 2021. Economists consider core prices a better gauge of the likely path of inflation.

The latest data suggests that the economy is achieving a difficult “soft landing,” in which inflation falls back to the Fed’s target without a recession. That outcome could make it easier for the Fed to consider cutting its key interest rate, which it raised 11 times since March 2022 to attack inflation. Higher interest rates have throttled home and auto sales by raising the cost of borrowing. Businesses have also chafed under the higher borrowing costs.

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On Thursday, a government report showed that the economy expanded at a surprisingly strong 3.3% annual pace in the final three months of last year. Solid consumer spending propelled the growth, capping a year that had begun with widespread expectations of a recession. Instead, the economy grew 2.5% in 2023, up from 1.9% in 2022.

Biden’s Republican critics have sought to highlight what had been the biggest inflation spike in 40 years, for which they have largely blamed the president’s spending policies. But with inflation having dropped sharply after an extended period of gloomy consumer sentiment, Americans are starting to show signs of feeling better about the economy. A measure of consumer confidence by the University of Michigan, for example, has jumped in the past two months by the most since 1991.

The details in Friday’s report all point to inflation being in check: Measured over the past six months, prices are up just 1.9%, which is actually below the Fed’s 2% target. Over the past three months, the figure is even lower: 1.5%.

After nearly two years of sharp increases, grocery prices were unchanged in December and were just 1.3% higher than a year earlier. Chicken prices actually dipped 0.4% from November to December; they’re up 1.2% compared to a year ago. Beef and veal prices, though, climbed 0.3% last month and are still 8.7% higher than a year earlier.

The report arrives less than week before the Fed will hold its latest policy meeting. The central bank is considered sure to keep rates unchanged, but attention will be focused on Chair Jerome Powell’s news conference for any clues about when the Fed might begin to cut interest rates.

“The Fed will be welcoming the inflation data,” said Lydia Boussour, senior economist at consulting firm EY. “It does suggest that inflation is on track and the Fed is well-positioned to start (cutting rates) in a few months.”

Friday’s report also showed that consumers sharply stepped up their purchases in December, with spending rising 0.7% from November, the biggest such gain since September. Incomes rose 0.3%, though by only 0.1% after adjusting for inflation.

In December, the Fed’s policymakers had projected that they would carry out three quarter-point rate cuts this year. Yet they provided little hint of when the first cut might occur. Late last year, Wall Street traders had bet that the first rate cut would occur in March.

Several Fed officials, though, have pushed back against such assumptions. Christopher Waller, an influential figure on the Fed’s Board of Governors, last week reiterated his view that inflation is on track to return to the Fed’s 2% goal. But Waller cautioned that any decision to cut rates should be “carefully calibrated and not rushed” — remarks that were widely interpreted as downgrading the likelihood of a March cut.

Many economists credit the Fed’s sharp rate hikes — which boosted its benchmark rate from near zero to about 5.4% after the most recent hike in July — with cooling demand and helping slow inflation. Rate cuts by the Fed, conversely, would eventually lead to lower borrowing costs for consumers and businesses.

Friday’s price data showed a lower level of inflation than did the most recent consumer price index, released earlier this month, which showed inflation at 3.4% in December. The more widely known CPI shows higher inflation than the Fed’s preferred measure partly because it puts greater weight on housing and rents, whose prices are higher than for many other goods and services.

During 2023, inflation fell steadily as global supply chains recovered from pandemic-era disruptions and more Americans came off the sidelines to take jobs, which helped slow wage growth. Slower-rising pay eases the pressure on businesses to raise prices to offset higher labor costs. According to the Fed’s preferred measure, inflation peaked at 7.1% in June 2022.

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