The US dollar slipped to finish the trading week as investors combed through the latest inflation data. Despite the decline on Friday, the greenback is still enjoying its best start to the year in about a decade. That said, the buck could come under pressure if investors begin re-pricing in earlier-than-expected rate cuts by the Federal Reserve.

According to the Bureau of Economic Analysis (BEA), the personal consumption expenditures (PCE) price index, which is the Fed’s preferred inflation gauge, was unchanged at 2.6% and rose 0.2% month-over-month in December.

Core PCE eased to 2.9% year-over-year last month, down from 3.2% and better than the market estimate of 3%. On a monthly basis, core PCE jumped 0.2%, in line with economists’ expectations.

Meanwhile, personal spending outpaced personal income in December. BEA figures show that personal spending surged by a higher-than-expected 0.7%, while personal income climbed 0.3% and matched the consensus estimate.

This was quite different from the consumer price index (CPI) last month, which ticked up to a hotter-than-expected 3.4%.

The recent inflation data comes after the BEA reported a higher-than-expected growth rate of 3.3%, down from 4.9% in the third quarter.

Overall, financial markets and policymakers are optimistic as the economy is still growing while inflation is slowing. At the same time, it could be bearish for equities because if the economy remains solid and inflation remains above trend, the central bank could have room to keep interest rates higher for longer.

But this might be mixed developments for the US dollar.

The US Dollar Index (DXY), a measurement of the greenback against a basket of currencies, fell 0.28% to 103.29, from an opening of 103.52. The index is flat this week and is up 2% year-to-date.

US Treasury yields were up across the board, with the benchmark ten-year yield at around 4.15%. The two-year yield added 3.5 basis points to 4.35%, while the 30-year bond was unchanged at 4.38%.

The USD/CAD currency pair plunged 0.34% to 1.3431, from an opening of 1.3477, at 13:34 GMT on Friday. The EUR/USD climbed 0.18% to 1.0869, from an opening of 1.0849.