(fxcue news) - The Commerce Department released a closely watched report on Friday showing consumer prices in the U.S. increased in line with economist estimates in the month of December. The report said the personal consumption expenditures (PCE) price index rose by 0.3 percent in December after inching up by 0.1 percent in November. The increase matched expectations. Prices for goods edged up by 0.2 percent compared to the previous month, while prices for services climbed by 0.3 percent. The annual rate of growth by the PCE price index accelerated to 2.6 percent in December from 2.4 percent in November, which was also in line with estimates. While prices for goods were unchanged compared to the same month a year ago, prices for services spiked by 3.8 percent. Excluding food and energy prices, the core PCE price index crept up by 0.2 percent in December following a 0.1 percent uptick in November. The core price growth also matched expectations. The annual rate of growth by the core PCE price index in December came in at 2.8 percent, unchanged from the two previous months and in line with estimates. "Inflation base effects are much friendlier in the next four months than they were in the last four," said FHN Financial Chief Economist Chris Low. "Inflation should drop." "Even if it does, however, the Fed is not likely to cut rates again until May at the earliest and more likely June," he added. "If inflation does not drop, the Fed will leave rates where they are. A lot is riding on the next few reports." The inflation readings, which are preferred by the Federal Reserve, were included in a report on personal income and spending. The Commerce Department said personal income climbed by 0.4 percent in December after rising by 0.3 percent in November. The increase was in line with estimates. Disposable personal income, or personal income less personal current taxes, also increased by 0.4 percent in December. Meanwhile, the report said personal spending grew by 0.7 percent in December after climbing by an upwardly revised 0.6 percent in November. Economists had expected personal spending to rise by 0.5 percent compared to the 0.4 percent increase originally reported for the previous month. With spending increasing by more than income, personal saving as a percentage of disposable personal income fell to 3.8 percent in December from 4.1 percent in November.