Inflation slowed a little last month.

At the same time, Americans spent more money.

Consumer prices rose 3.4% in August compared with a year earlier.

The Commerce Department said this on Wednesday.

That was below the 3.7% that economists had expected.

Prices climbed 0.3% from July to August.

That was up from 0.1% in July.

Core inflation excludes energy and food, which change a lot.

It also came in lower than expected.

It rose 3% in August from a year earlier.

From July to August, core prices rose just 0.2%.

That was up from 0.1% the month before.

Many economists had feared core prices would rise faster.

U.S. markets went higher on the news.

Investors bet that a expected interest-rate hike from the Federal Reserve might be delayed.

Still, inflation remains above the Fed's 2% target.

The monthly increase in August suggests it is not moving back toward that target soon.

The Fed raised its key short-term rate two weeks ago.

This was the first time in three years.

Most economists expect it will do so at least once more this year.

It may happen as soon as late next month.

Bill Adams is chief U.S. economist at Fifth Third Commercial Bank.

He said in an email that inflation's trend is lower.

But it is still not close to the Fed's target, and it is not improving.

The report covered the personal consumption expenditures price index.

This is a key gauge the Fed watches.

High prices have weighed on the U.S. economy.

Growth is mostly solid and unemployment is low.

Despite high prices, spending jumped 0.9% from July to August.

That was up from 0.1% the month before.

After-tax incomes were unchanged in August, adjusted for inflation.

They had risen 0.3% in July.