STORY: A key U.S. inflation report out Friday showed prices rose moderately in April, in line with expectations.

The Commerce Department’s personal consumption expenditures price index – the Federal Reserve’s preferred inflation gauge – increased 0.3% last month, matching March’s gain.

In the 12 months through April, prices rose 2.7%, according to the report.

The Fed is aiming to bring that annual rate down to 2%, and has hiked interest rates in an effort to achieve that goal.

Core inflation, which strips out volatile food and energy prices, improved slightly, ticking up 0.2% – down from the prior month.

Consumer spending in April also cooled.

Markets continue to see about a 50% chance that the central bank will begin to cut interest rates in September.