WASHINGTON (Reuters) – Underlying U.S. consumer prices increased at their slowest pace in six months in August, suggesting that inflation had probably peaked, though it could remain high for a while amid persistent supply constraints.

The Labor Department said on Tuesday its Consumer Price Index excluding the volatile food and energy components edged up 0.1% last month. That was the smallest gain since February and followed a 0.3% rise in July. The so-called core CPI increased 4.0% on a year-on-year basis after advancing 4.3% in July.

The overall CPI rose 0.3% last month after gaining 0.5% in July. In the 12 months through August, the CPI increased 5.3% after soaring 5.4% year-on-year in July.

Economists polled by Reuters had forecast the core CPI gaining 0.3% and the overall CPI rising 0.4%.

Inflation heated up at the start of the year, driven by soaring prices for used cars and trucks, as well as services in industries worst affected by the COVID-19 pandemic.

There are signs that the used cars and trucks price surge has run its course. The hotel and motel accommodation prices are now above the pre-pandemic level, suggesting moderate gains ahead. The slowdown in monthly inflation rates aligns with Federal Reserve Chair Jerome Powell’s long-held belief that high inflation is transitory.

But bottlenecks in the supply chain remain and the labor market is tightening, pushing up wages.

A shortage of homes is driving record house price gains and rents are going up as vaccinations allow companies to recall workers back to offices, pulling Americans back to cities following a pandemic-fueled exodus to low-density areas. These factors could contribute to keeping annual inflation higher.

“If there is any relation between the real world and government data, we may start to see the enormous increase in home prices and rents filter into the CPI,” said David Donabedian, chief investment officer of CIBC Private Wealth US, in Baltimore.

The government reported last week that producer prices increased solidly in August, with the PPI posting its largest annual gain in nearly 11 years..

The CPI report comes as speculation is growing in financial markets on when the Fed will announce it will start scaling back its massive monthly bond-buying program. Powell has offered no signal on when the U.S. central bank plans to cut its asset purchases beyond saying it could be “this year.”

The Fed’s preferred inflation measure for its flexible 2% target, the core personal consumption expenditures price index, increased 3.6% in the 12 months through July after a similar gain in June. August’s data will published later this month.

“Recently broadening wage pressures across sectors could lead to more broad-based increases in services prices,” said Veronica Clark, an economist at Citigroup in New York.

“Strong increases in ‘transitory’ price components over the last few months will keep the annual pace of inflation elevated for some time, implying that it will be more important to assess the details of inflation data to gauge the persistence of inflationary pressures.”

(Reporting by Lucia Mutikani, Editing by Chizu Nomiyama)