(WASHINGTON) — Consumer prices rose 3% last month compared to a year ago, marking a significant slowdown and raising hopes that a prolonged bout of heightened inflation is nearing its end.

The fresh data Wednesday morning from the Bureau of Labor Statistics arrives days after a government release indicated that hiring slowed last month but remained solid. The economy, the jobs report suggests, continued a gradual downshift in June amid a central bank effort to dial back activity and slash prices while averting a recession.

Consumer prices rose 4% in May compared to a year ago.

The latest reading indicates a notable cooldown in June but still exceeds the Federal Reserve’s inflation target of 2%.

The data released on Wednesday exceeded the expectations of economists surveyed by Bloomberg, who expected inflation to have fallen to 3.1% in June.

Inflation rose a modest 0.2% on a monthly basis, accelerating from a 0.1% increase in May.

Despite the encouraging report, core inflation — which strips out volatile food and energy prices — rose 4.8%.

Food prices, meanwhile, continued to accelerate faster than overall inflation, rising 5.7% in June compared to a year ago.

The price of flour rose about 12% in June compared to a year ago, roughly quadruple of the overall inflation rate; while the price of bakery products rose 9.5% over that period and the price of cookies rose nearly 9%.

Egg prices, which surged last year after a severe avian flu outbreak, fell nearly 8% in June compared to a year prior. Prices for milk, seafood and bacon also fell over that period.

The Fed is set to meet in roughly two weeks as it considers whether to escalate its fight against inflation with an additional rate hike.

Last month, the Fed paused an aggressive series of interest rate hikes, ending a string of 10 consecutive rate increases that stretched back 15 months.

However, nearly all members of the decision-making committee believe the central bank will need to impose at least one additional rate hike this year, Fed Chair Jerome Powell said immediately after the announcement of a pause.

In remarks late last month, Powell voiced an optimistic message about the U.S. economy and downplayed the threat of a recession.

“The U.S. economy has actually been quite resilient,” Powell said in Sentra, Portugal, at a conference organized by the European Central Bank.

While acknowledging that a recession is “certainly possible,” he said such an outcome is “not the most likely case.”

“The economy is resilient and still growing, albeit at a modest pace,” he added.

A major upward revision showed last Thursday that the U.S. economy grew significantly more at the outset of this year than an initial measurement indicated, according to the Commerce Department.

Gross domestic product increased at a 2% annualized rate for a three-month period ending in March — a sizable jump from the previous estimate of 1.3%.

A jobs report on Friday, meanwhile, showed that U.S. employers hired 209,000 workers in June, which marked robust performance, albeit a slowdown from the previous month.

Wage growth, assessed by workers’ average hourly earnings, remained unchanged at 4.4% compared to the same month a year prior. As part of its inflation fight, the Fed closely watches the pace of wage growth, since in theory employers raise prices to keep up with higher pay.

“The labor market is really pulling the economy,” Powell said late last month, before the release of hiring data for June. “It’s a very strong labor market.”

“In my view, the least unlikely case is that we do find a way to better balance without a severe downturn,” he added.

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