Inflation pressures eased slightly in May as consumer spending slowed considerably, according to a Commerce Department report released Friday.

The personal consumption expenditures price index, a number closely watched by the Federal Reserve, increased 0.3% for the month when excluding food and energy, a number that was in line with the Dow Jones estimate. So-called core PCE increased 4.6% from a year ago, 0.1 percentage point less than expected.

In April, the index rose 0.4% for the month and 4.7% from a year ago.

When including the volatile food and energy components, inflation was considerably softer — up just 0.1% on the month and 3.8% from a year ago. Those were down respectively from the 0.4% and 4.3% increases reported for April.

While inflation pulled back a bit, spending rose just 0.1% for the month, below the 0.2% estimate and a sharp drop from the 0.6% increase in April. That deceleration came even though personal income accelerated 0.4%, ahead of the 0.3% estimate.

Though Friday’s data showed inflation moving gradually in the right direction, it is still well above the Fed’s 2% longer-term target. Central bank Chairman Jerome Powell said this week that level isn’t likely to be achieved for a few years yet.

At their meeting earlier in June, Fed officials indicated they expect at least two more quarter-point interest rate hikes before the end of the year. Even Atlanta Fed President Raphael Bostic, who is not in favor of further increases, said Thursday he doesn’t see any cuts coming either this year or in 2024.

Traders are pricing in about an 87% chance that the Fed approves a quarter-point increase at the July meeting, odds that were little changed following Friday’s data release, according to CME Group calculations.

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