WASHINGTON (AP) — Wholesale prices in the United States rose by a larger-than-expected 2.6% last month from a year earlier, a sign that some inflation pressures remain high.

The increase, the sharpest year-over-year increase since March 2023, comes at a time when other price indicators are showing that inflation has continued to ease.

The Labor Department said Friday that its producer price index — which tracks inflation before it reaches consumers — rose 0.2% from May to June after being unchanged the month before. Excluding food and energy prices, which tend to bounce around from month to month, so-called core wholesale prices increased 0.4% from May and 3% from June 2023.

The increase in wholesale inflation last month was driven by a sizable 0.6% rise in services prices, led by higher profit margins for machinery and auto wholesalers.

By contrast, the overall prices of goods fell 0.5%. Gasoline prices tumbled 5.8% at the wholesale level. Food prices also dropped.

The producer price index can provide an early sign of where consumer inflation is headed. Economists also watch it because some of its components, notably healthcare and financial services, flow into the Federal Reserve’s preferred inflation gauge — the personal consumption expenditures, or PCE, index.

RELATED COVERAGE Groceries are expensive, but they don’t have to break the bank. Here are some tips to save PepsiCo’s second quarter profits jump but customers slow their purchases after years of price hikes Stock market today: Asian stocks mixed amid volatile yen after Wall St climbs on inflation report

Friday’s wholesale figures follow the government’s report Thursday that consumer inflation cooled in June for a third straight month. Consumer prices declined 0.1% from May to June — the first such drop in overall inflation since May 2020, when the economy was paralyzed by the pandemic.

As a whole, this week’s price figures, along with other recent data, still suggest a continued slowdown in the inflation that first gripped the nation three years ago, when the economy rocketed out of the pandemic recession, leaving deep supply shortages and sending prices soaring.

The Fed raised its benchmark interest rate 11 times in 2022 and 2023, to a 23-year high, to try to curb the price spikes. Inflation has since cooled from its four-decade high of 9.1%, and the central bank is widely expected to begin cutting interest rates in September.

“The big picture is that inflation pressures have moderated over the last two years but are still a bit stronger than the Fed would like them to be,″ said Bill Adams, chief economist at Comerica Bank. ”With the economy operating in low gear, the Fed thinks the right time to start cutting interest rates is close. But they are planning to cut gradually.″

Rate cuts by the Fed would likely lead, over time, to lower borrowing costs for mortgages, auto loans and credit cards as well as business borrowing, and could also boost stock prices.

A brief pickup in inflation early this year had caused Fed officials to scale back their expectations for interest rate cuts. The policymakers said they would need to see several months of mild price increases to feel confident enough to cut their key rate from its 23-year high.

Even as inflation slows by most measures, the costs of food, rent, health care and other necessities remain much higher than they were before the pandemic — a source of public discontent and a potential threat to President Joe Biden’s re-election bid.

Yet despite the lingering inflation pressures and higher borrowing costs, the U.S. economy remains steady, if gradually slowing. Hiring is still solid. And unemployment remains relatively low, giving Americans unusual job security.