U.S. prices rose moderately in June, underscoring an improving inflation environment that potentially positions the Federal Reserve to begin cutting interest rates in September.

The personal consumption expenditures (PCE) price index nudged up 0.1% last month after being unchanged in May, the Commerce Department's Bureau of Economic Analysis said on Friday. In the 12 months through June, the PCE price index climbed 2.5% after rising 2.6% in May.

Excluding the volatile food and energy components, the PCE price index rose 0.2% last month. That followed an unrevised 0.1% gain in May.

Economists polled by Reuters had forecast both monthly headline PCE and core inflation rising 0.1% in June. Following Thursday's gross domestic product data showing core inflation rising slightly faster than expected in the second quarter, some raised their core PCE price index estimate to 0.2%. Forecasts for headline PCE inflation were little changed.

Overall, price pressures are subsiding and could help Fed officials meeting next week build more confidence that inflation is moving toward the U.S. central bank's 2% target. The Fed tracks the PCE price measures for monetary policy.

Demand in the economy has cooled in response to the central bank's aggressive monetary policy tightening in 2022 and 2023. Economic growth averaged 2.1% in the first half of this year compared to 4.2% in the second half of 2023.

The Fed 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.

Subsiding inflation and easing labor market conditions have led financial markets to anticipate three rate cuts this year, starting in September.

Consumer spending, which accounts for more than two-thirds of U.S. economic activity, increased 0.3% last month after rising 0.4% in May, the report also showed.

The data was included in the advance second-quarter GDP report, which showed the economy growing at a 2.8% annualized rate, double the first quarter's 1.4% pace.

(Reporting by Lucia Mutikani; Editing by Chizu Nomiyama)