The Federal Reserve’s preferred inflation gauge cooled as expected in January; however, the good news came with another potential red flag for the US economic engine: Consumers pulled back their spending by the most in nearly four years.

The Federal Reserve's preferred inflation gauge eased modestly last month, but personal-spending figures showed one of the biggest pullbacks in more than a year, suggesting further weakness in the domestic economy.

Inflation pressures continued to moderate in January, which may give the Federal Reserve reason to lower interest rates again later this year. The personal consumption expenditures, or PCE, price index,