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(Bloomberg) — The Federal Reserve’s preferred gauge of underlying inflation cooled last month while household spending rebounded.

The so-called core personal consumption expenditures price index, which strips out the volatile food and energy components, increased 0.3% from the prior month, data out Friday showed. That followed a 0.5% reading in January, marking the biggest back-to-back gain in a year.

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Fed officials may nonetheless take comfort in a tame increase in a narrower gauge of services inflation within the report. At the same time, inflation-adjusted consumer spending exceeded all estimates on the heels of the biggest gain in wages in over a year, according to the report from the Bureau of Economic Analysis.

The cooler inflation reading is a welcome reprieve after other measures showed price pressures intensified at the start of the year. Even so, Fed officials are looking for more evidence that inflation is sustainably on a downward trend, and in the meantime, they’re not rushing to cut interest rates.

Chair Jerome Powell, who is speaking later Friday, has stressed the need for patience, saying the timing of the first rate cut would be “highly consequential.” Policymakers will have access to one more PCE report, in addition to others on consumer and producer prices as well as employment, before their next meeting starts on April 30.

Read More: Fed Goes Against the Textbooks With Foot-Dragging on Rate Cuts

US stock and bond markets are closed in observance of Good Friday.

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Officials pay close attention to services inflation excluding housing and energy, which tends to be more sticky. That metric stepped down to 0.2% from a month ago after a 0.7% surge in January, according to the BEA. Health care and financial services registered much smaller increases than in the prior month.

A still-robust labor market has so far supported household demand, despite high borrowing costs, fewer job postings and persistent inflation. Services spending surged by the most since July 2021, bolstered by international travel, transportation and financial services. Goods outlays, meanwhile, edged up after a steep drop in the prior month and helped by auto sales.

“We really just haven’t seen that consumer fatigue that we were getting some hints of in the last month’s data,” said Sarah House, senior economist at Wells Fargo & Co. “That’s going to make it really hard, I think, for businesses to hold the line on prices if consumers are still willing to splash out at these levels.” 

What Bloomberg Economics Says…

“We think a cooling labor market in coming months, and a further slowing of personal income growth, will result in slower spending growth overall. We continue to believe the Fed is on track for a June rate cut as economic conditions soften.”

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— Stuart Paul and Estelle Ou. To read the full note, click here

Separate data out Thursday showed consumer spending was revised higher at the end of last year on the back of stronger outlays for health care and financial services, even as goods spending was weaker than originally estimated. Fourth-quarter core PCE inflation was also revised slightly lower in that report.

While overall incomes moderated due in part to weaker dividend payments, a narrower measure of earnings known as wages and salaries advanced 0.8%, the most since the start of last year. 

The saving rate fell to the lowest since the end of 2022, possibly indicating that people are dipping into savings to support spending.

—With assistance from Kristy Scheuble, Cécile Daurat and Reade Pickert.

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