U.S. main stock indexes inched up on Friday and small-cap stocks outperformed after a benign inflation report cleared the way for the Federal Reserve to focus on shoring up the labor market while continuing its interest rate easing.

Inflation showed further signs of cooling on Friday as Wall Street starts to price in further interest rate cuts by the Federal Reserve. The personal consumption expenditures price index (PCE), the Fed’s preferred measure of inflation,

An inflation measure that is closely watched by the Federal Reserve accelerated in August, underscoring the challenge in combating steep consumer prices.

Inflation continued to inch closer to the Federal Reserve benchmark target Friday, falling to 2.2% year-to-year in August, and beating Wall Street forecasts.

The Federal Reserve's preferred inflation gauge is expected to show that price pressures continued to ease gradually in August. The personal-consumption expenditures price index, or PCE, tracks a broader range of outlays than the better-known consumer-price index.