June’s reading of the Fed’s preferred inflation gauge showed a slightly higher-than-expected price increase.

The core Personal Consumption Expenditures (PCE) index, which excludes food and energy costs and is closely monitored by the Federal Reserve, rose 2.6% year-over-year in June, surpassing economists’ 2.5% estimate and remaining unchanged from May. Despite this, the June figure represents the slowest annual increase in core PCE in over three years.

Month-over-month, core PCE increased by 0.2%, aligning with Wall Street’s expectations and exceeding May’s 0.1% rise.

“It is another bit of evidence for the Fed to say, yes, the upside that we saw on inflation, the first quarter was largely an aberration,” BofA Securities head of US Economics Michael Gapen told Yahoo Finance. “It did not break the disinflation trend. Inflation appears to be decelerating, gradually, in the direction that the Fed wants.”

The report comes on the heels of encouraging inflation data. The latest Consumer Price Index (CPI) showed core prices increased by 0.1% from the previous month, which was lower than economists had predicted.

Prior to the PCE release, Federal Reserve Chair Jerome Powell remarked that recent inflation data “add somewhat to confidence” that inflation is trending toward the Fed’s 2% target. The Fed’s next monetary policy decision is scheduled for July 31.

Markets broadly anticipate that the Fed will maintain interest rates at their current level in July before potentially implementing the first rate cut in September.