Inflation held steady in July and ran slightly cooler than expected, increasing the odds of a Federal Reserve rate cut next month.

The core index that omits energy and food costs also rose by 0.3% in June, but the annual rate ticked up to 2.8% from 2.7% and slightly above forecasts. Personal spending rose by 0.3%, below the 0.4% forecast but still suggesting consumers are willing to continue shopping.

With inflation easing and the labor market cooling, the risks of keeping policy too tight are mounting. The CME Group now puts the implied odds of a September rate cut at 92.2 percent, reflecting growing expectations in the fed funds futures market that the Fed will respond to the softer data.