The latest reading of the Federal Reserve's preferred inflation gauge showed prices increased in line with expectations in December as inflation remained above the Fed's 2% target.

The "core" Personal Consumption Expenditures (PCE) index, which strips out food and energy costs and is closely watched by the central bank, rose 0.2% from the prior month during December, meeting Wall Street's expectations. The reading was higher than the 0.1% increase seen in November.

Over the prior year, core prices rose 2.8%, in line with Wall Street's expectations and unchanged from November. On a yearly basis, overall PCE increased 2.6%, a pickup from the 2.4% seen in November.

The reading comes two days after the Federal Reserve paused its interest rate-cutting cycle after reducing rates at its prior three meetings. Fed Chair Jerome Powell described inflation as "somewhat elevated relative to our 2% longer-run goal" during his press conference on Wednesday.

Read more: Fed rate decision: How it affects your bank accounts, loans, credit cards, and investments

After the meeting, economists largely argued that the Fed appears to be waiting for more inflation data and a clearer picture of Trump's potential tariff plans .

"In the current situation there’s probably some elevated uncertainty because of, you know, significant policy shifts in those four areas that I mentioned: tariffs, immigration, fiscal policy, and regulatory policy," Powell said on Wednesday.

Further news on tariffs, which many believe could keep inflation above the Fed's target , is expected over the weekend. President Trump said he plans to put a 25% tariff on imports from Mexico and Canada on Feb. 1.

Josh Schafer is a reporter for Yahoo Finance. Follow him on X @_joshschafer .