WASHINGTON (Reuters) – U.S. producer prices increased moderately in June, further confirmation that inflation had resumed its downward trend and strengthening the case for a September interest rate cut.

The producer price index for final demand rose 0.2% last month after being unchanged in May, the Labor Department’s Bureau of Labor Statistics said on Friday. Economists polled by Reuters had forecast the PPI nudging up 0.1%.

In the 12 months through June, the PPI increased 2.6% after advancing 2.4% in May.

The government reported on Thursday that consumer prices fell for the first time in four years in June amid cheaper gasoline and a broad deceleration in the costs of goods and services, including rents.

The tame inflation data followed news last week of a rise in the unemployment rate to a 2-1/2 year high of 4.1%.

With the Federal Reserve now wary of labor market weakness, economists and financial markets are increasingly betting on a rate cut in September, with another reduction in borrowing costs expected in December.

Fed Chair Jerome Powell acknowledged the improving inflation environment during his testimony before lawmakers this week, but also highlighted the risks to the labor market saying “we have seen considerable softening.”

The U.S. central bank has maintained its benchmark overnight interest rate in the current 5.25%-5.50% range since last July. It has hiked its policy rate by 525 basis points since 2022.

(Reporting By Lucia Mutikani; Editing by Andrea Ricci)