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Prices for an array of consumer goods rose less than expected in August in a sign that inflation may be starting to cool, the Labor Department reported Tuesday.

The consumer price index, which measures a basket of common products as well as various energy goods, increased 5.3% from a year earlier and 0.3% from July. A month ago, prices rose 0.5% from June.

Economists surveyed by Dow Jones had been expecting a 5.4% annual rise and 0.4% on the month.

Stripping out volatile food and energy prices, the CPI rose just 0.1% for the month vs. the 0.3% estimate, and 4% on the year against the expectation of 4.2%.

The 5.3% annual increase still keeps inflation at its hottest level in about 13 years, though the August numbers indicate the pace may be abating.

Markets initially rallied following the release, with stock index futures well off their morning lows. However, the market headed lower after the open.

Energy prices accounted for much of the inflation increase for the month, with the broad index up 2% and gasoline prices rising 2.8%. Food prices were up 0.4%. Energy is up 25% from a year ago and gasoline has surged 42% during the period.

However, excluding those two categories resulted in the slowest monthly CPI increase since February.

Used car and truck prices, which had been a major feeder of the headline inflation gains, fell 1.5% in August but are still up 31.9% year on year. New vehicle prices, though, rose 1.2%.

Transportation services declined 2.3% for the month.

Federal Reserve officials have been watching inflation closely but have largely said they believe this year’s burst will be temporary and due to factors that will soon fade. They cite supply chain bottlenecks, shortages of critical products like semiconductors and heightened pandemic-related demand for goods as major contributors that at some point will drift back to normal levels.

Markets largely expect the Fed to start pulling back on some of the unprecedented monetary policy help the central bank has provided during the pandemic. Fed policymakers themselves have indicated that they probably will start slowing the pace of their monthly bond purchases before the end of the year.

Investor fears about inflation have calmed as well. The Bank of America Fund Manager Survey for September indicated that a net level of respondents now expect inflation to fall over the next 12 months. As recently as April, a net 93% were expecting it to increase.

Tuesday’s report of the consumer price index could set the tone for markets ahead of next week’s Federal Reserve meeting, particularly if it is hotter than expected.

The CPI is expected to have risen 0.4% in August month over month, according to a Dow Jones consensus estimate. On a year-over-year basis, CPI would then be up 5.4%, the same pace it was in July. Excluding food and energy, CPI is expected to rise 0.3% or 4.2% year over year, according to estimates.

The data is set for release Tuesday at 8:30 a.m. ET.

Inflation data has been coming in stronger than expected, raising concerns it may be more persistent than Fed officials believe it to be. The Fed meets next Tuesday and Wednesday and is widely expected to discuss tapering its bond-buying program but not formally announce its plans until later in the year.

But some market pros say another warning about rising inflation could speed the Fed’s timetable even though August’s employment report was weaker than expected. Some market pros pushed back their expectations for a Fed announcement after August jobs gains totaled just 235,000, about 500,000 less than expected.

“If inflation is hot that would imply a little bit faster timeline from the Fed,” BMO U.S. rates strategist Ben Jeffery said. He noted he would expect a higher-than-expected pace to send interest rates higher.

CIBC Private Wealth U.S. chief investment officer David Donabedian said a hotter number could be a worry for stocks and send bond yields higher. Yields move opposite price.

He said the market will be focused closely on what components of the CPI are showing higher inflation rates.

Donabedian added he is watching to see if temporary Covid-related sources of inflation, such as hotels and airfare, began to ease, or if inflation was due to supply shortages. He said it now appears that supply chain issues are more severe than they seemed even just three months ago, and he expects inflation to continue to be an issue.

“Certainly the trend has been for the inflation number to come in above expectations. I think if that happens again, it will feed this narrative that high inflation is going to stick around longer than the Fed had been planning,” he said.

Donabedian said he sees about a 1-4 chance a hot CPI number could prompt the Fed to move sooner to announce the tapering. He said he is watching to see if things that might be more persistent, like rising rents will show up in the number.

“The Fed keeps saying they see inflation as being transitory. Yet the inflation data is getting worse rather than better,” CFRA chief investment strategist Sam Stovall said. “If it’s hotter than expected, I think the stock market’s going to continue to be soft. I think investors are trying to decide whether there’s more to this worry, than not.”

Stocks posted a mild comeback Monday following five days of losses for the Dow Jones Industrial Average partly tied to the inflation concern.

Some Fed officials in recent weeks have said they believe the central bank should start paring back its $120 billion a month bond purchases sooner rather than later. But Fed Chairman Jerome Powell has said he wants to see more strong employment reports before tapering is announced.

Stovall said he does not expect a formal announcement until November. The Fed’s move away from the bond purchase program would be its first major step away from it easy policy and ultimately sets the stage for interest rate hikes.

“If we end up with both headline and core CPI stronger than anticipated, I think certainly statements will be made regarding inflation, while it might not force them to say anything about tapering sooner,” Stovall said.