NEW YORKLONDON, July 26 Reuters The dollar eased fractionally alongside Treasury yields after the release of tame U.S. inflation data that is unlikely to deflect the Federal Reserve from adopting a less restrictive monetary policy in the coming months.

The Commerce Department39;s June personal consumption expenditures PCE price index nudged up 0.1, as expected, after being unchanged in May, underscoring an improving inflation environment that potentially positions the Fed to begin cutting interest rates in September.

Year over year, the PCE price index climbed 2.5 after rising 2.6 in May, also in line with forecasts by economists polled by Reuters. The Fed closely tracks the PCE price measures for monetary policy, and subsiding inflation pressures could help officials meeting next week gain confidence that inflation is moving toward the U.S. central bank39;s 2 target.

Steve Englander, head of G10 FX research at Standard Chartered Bank in New York, said that quarterly PCE data released with Thursday39;s surprisingly strong 2.8 growth rate print on last quarter39;s GDP prompted mental preparation for a worse monthly read.

Thursday39;s number showed PCE prices rising at a 2.9 rate, so the rise reported Friday was more of a relief.

The number was good enough, Englander said. It wasn39;t a home run but compared to yesterday markets said 39;yep nothing to worry about here, it doesn39;t really derail September and they weren39;t going to cut in July anyway. So life goes…