US inflation bounced back last month, but by less than expected. The data should support two more rate hikes in 2017, but if inflation doesn’t pick up, it may impact plans for more aggressive policy tightening down the road.

After posting a negative US Consumer Price Inflation (CPI) reading in March, April’s numbers were substantially improved—but the magnitude of the bounceback was smaller than expected (Display). Headline CPI rose by 2.2% year over year, and core CPI, which excludes food and energy prices, rose by 1.9%. Both numbers were slightly lower than the market expected.

Our view is that the data are strong enough to allow the Federal Open Market Committee (FOMC) to raise official short-term rates in June, but soft enough to tamp down expectations of more aggressive tightening later. We still expect a rate hike next month and one more later this year, but if CPI doesn’t show a bit more life in the next couple of months, we’ll have to revisit our second-half forecasts.

The deceleration in headline inflation is easy enough to explain: top-line prices continue to move in near lockstep with oil prices, and recent commodity price declines suggest that headline CPI is likely to fall farther in coming months. Because headline CPI is so closely linked to commodity prices, the Fed doesn’t generally focus on it. Instead, officials prefer to look at core inflation, which is both more stable and more heavily influenced by monetary policy.