September’s Personal Consumption Expenditures (PCE) showed that headline inflation increased by 0.4%, with the year-over-year reading holding steady at 3.4%. Core PCE, the Fed’s preferred method which strips out volatile food and energy prices, rose by 0.3% in September. The year-over-year reading fell from 3.8% to 3.7% – the lowest level in two years.

What’s the bottom line? Inflation has made significant progress lower after peaking last year, with the headline reading at 3.4% (down from 7.1%) and the core reading at 3.7% (down from 5.6%). Plus, if we annualize the last six months’ worth of Core PCE readings (which the Fed did during their last meeting), Core PCE is even lower at 2.8%. While this is still above the Fed’s 2% target, it’s moving in the right direction.

Remember, the Fed has been hiking its benchmark Fed Funds Rate (which is the overnight borrowing rate for banks) to try to slow the economy and curb inflation.

Their latest hike in July was the eleventh since March of last year, pushing the Fed Funds Rate to the highest level in 22 years. The Fed did not hike at their September meeting, so they could continue to assess incoming inflation, labor sector and other economic data.

Will the progress we’ve seen be enough for the Fed to pause rate hikes once again at their meeting this week? We’ll find out on Wednesday.