Inflation measured by the core Personal Consumption Expenditure (PCE) index, which is closely followed by the Federal Reserve to decide on interest rates, slowed in August while still remaining above the Fed's target.

The core PCE rose 3.9% in the 12 months through August, from 4.3% in July, the Commerce Department said in a statement Friday. On a monthly basis, the index gained 0.1%, the lowest in two years and less than the 0.2% increase in July. The Fed targets an annual inflation of 2%.

When energy and food are included, inflation measured by the PCE accelerated, reflecting increases in gas prices. The monthly rate rose 0.4% in August from 0.2% in July. Annually, prices increased 3.5% in August after a 3.4% gain in the previous month.

The report also showed that personal consumption significantly slowed to 0.4% in August from 0.9% in July, while income rose 0.4% from 0.2%.

The next major economic data to be released is the labor report for the month of September, which is scheduled for Oct. 6. The US unemployment rate rose to 3.8% in Aug. from 3.5% in July, while the number of new nonfarm jobs rose to 187,000 from 157,000.

The Fed maintained the U.S. benchmark rate in the range of 5.25% to 5.50% on Sept. 20, the highest level in 22 years. Projections in the Fed's dot plot, which accompanied the announcement, showed the likelihood of one more hike this year.

The Fed has two more monetary policy meetings in 2023, on Nov. 1 and Dec. 13.