The Federal Reserve’s preferred inflation measure climbed by slightly less than expected last month and underlying growth in the US economy remained robust in the second quarter, helping keep near-term expectations for the Federal Reserve’s policy trajectory intact.

Monthly data released by the Bureau of Economic Analysis this morning showed the core personal consumption expenditures index rising 0.1% in June from the prior month, undershooting market forecasts for a 0.2% increase. On a year-over-year basis, core price growth decelerated to 3.3% from 3.4% previously, aligning with economist estimates.

The overall personal consumption expenditures index fell -0.1% relative to the prior month, and was up 3.7% from a year ago, matching the consensus estimate as a decline in energy costs helped ease price pressures. Personal income rose 0.2% month-over-month, slightly below forecast—while inflation-adjusted household spending climbed 0.4%, topping expectations that had been set closer to the 0.3% mark.

Separate data showed the US economy growing by less than anticipated in the second quarter, with inventory adjustments and a widening trade deficit obscuring continued strength in consumption and investment. Inflation-adjusted gross domestic product increased at an annualised 1.5%—below the 2.0% consensus—in the three months to June, after rising at a 2.1% pace in the first quarter, according to an initial estimate from the Bureau of Economic Analysis. A decline in net exports—consistent with higher purchases by US households and businesses—helped arithmetically offset sharp rises in consumption and investment. Personal consumption climbed at a solid 3.2%, while final sales to private domestic purchasers—often considered the cleanest read on underlying growth—rose at an annualised 3.9%.

Front-end Treasury yields are edging slightly higher and the dollar is consolidating as market participants modestly increase bets on the Fed beginning to tighten as soon as September—but conviction remains thin at best. Yesterday’s “hawkish hold” was quickly unwound during an underwhelming performance from newly minted chair Kevin Warsh in the post-decision press conference, triggering violent steepening in yield curves as rate expectations fell across the front end and spiked at longer durations—and that dynamic remains intact for now.