U.S. consumer prices rose slightly in May, with the Fed’s preferred inflation gauge, the PCE price index, up 0.1% monthly and 2.3% annually—still above the Fed’s 2% target.

Core PCE, which excludes food and energy, rose 0.2% on the month and 2.7% annually.

Meanwhile, consumer spending fell 0.1% and personal income dropped 0.4%, signaling a slowing economy.

Markets expect the Fed to hold rates steady in July, though hopes for a cut persist, CNBC has reported.

Inflation pressures remain muted overall, with services costs driving most of the increase while goods prices stayed nearly flat.

Written by B.C. Begley