The Fed’s recommended inflation measure was eased in October

A closely watched measure of inflation showed continued signs of weakening in October, which was encouraging news for the Federal Reserve as officials try to assess whether to take further action to completely eradicate rapid price increases.

The inflation measure for personal consumption expenditure, which the Fed cites when it says it aims for inflation to average 2 percent over time, rose 3 percent over the year through October. That was downstairs 3.4 percent last month, and was in line with economists’ forecasts. Compared to the previous month, prices were flat.

After removing volatile food and fuel prices to get a clearer picture of underlying price pressures, inflation rose 3.5 percent over the year. That was lower than before (3.7 percent).

The latest evidence that price increases are slowing came amid other positive news for Fed officials: consumers are spending less robustly. A measure of personal consumption that has increased by 0.2 percent since September. This represented a slight delay compared to the previous month.

The report could provide important insights to Fed officials as they prepare for their final meeting of 2023, which takes place Dec. 12-13. While investors widely expect policymakers to leave borrowing costs unchanged at the meeting, central bankers will release a new set of economic projections that could point to their plans for future policy. Jerome H. Powell, the Fed chairman, will also hold a news conference.

Policymakers have been closely watching how both inflation and consumer spending evolve as they assess how to proceed. They have already raised interest rates to a range of 5.25 to 5.5 percent, the highest level in more than two decades. That’s why many officials have indicated it may be time to pause and see how policy evolves.

But the economy has proven more resilient to higher borrowing costs than many expected, keeping some at the Fed wary. If strong demand allows companies to keep raising prices without losing customers, it could become more difficult to completely stave off inflation.

“I am encouraged by the early signs of moderating economic activity in the fourth quarter based on available data,” Christopher Waller, one of the Fed governors, said this week. Still, he added that “inflation is still too high, and it is too early to say whether the slowdown we are seeing will continue.”