(Reuters) -U.S. Federal Reserve policymakers sifting through the latest inflation data will find little to fuel a sense of urgency to cut interest rates, but also nothing to rule out the likelihood of rate reductions starting later this year.

That was the view from financial markets and analysts following a government report on Friday that showed inflation rose last month largely in line with economist expectations, and with what Fed officials themselves had said they anticipated.

The year-over-year rise in personal consumption expenditures (PCE) price index, which the U.S. central bank targets at 2%, accelerated to 2.7% in March from 2.5% in February. Core PCE, a measure of underlying inflation, came in at 2.8%, the same as February.

"Phew," wrote Inflation Insights' analyst Omair Shariff. A report Thursday showing economic growth had slowed in the first quarter but inflation had accelerated had stoked fears of a resurgence of price pressures that analysts had worried would be confirmed in Friday's report, and that could defer, or even end, hopes for Fed policy easing this year.

"The fact that it came in closer to consensus could be viewed with a sigh of relief," Shariff said.

After the report, futures contracts that settle to the Fed's policy rate interest-rate futures prices pointed to about a 60% chance of a rate cut at the U.S. central bank's mid-September meeting, slightly more than before the report. Traders continued to see about a 50-50 chance of a second rate cut by the end of the year.

Fed policymakers meet next week and are nearly universally expected to keep the policy rate in its current 5.25%-5.5% range, and to continue to signal no urgency on cuts. Fed Chair Jerome Powell has said the central bank needs more confidence that inflation is heading towards their 2% goal before cutting rates.

While Friday's data did not do further damage to that confidence, it did not do much to boost it either, analysts said. The report showed housing and transportation costs continued to push upward on prices.

"Given the momentum for the economy and prices, we don't expect the Fed to strongly consider easing monetary policy until its September meeting at the earliest," wrote Nationwide economist Ben Ayers. "There is also a risk that the further economic resilience pushes off any rate declines until 2025, a key downside risk for growth next year."

Rate futures are pricing in about a 17% chance of no rate cuts at all this year, down about 20% before the report but elevated compared with a few weeks ago, when two or even three rate cuts this year was seen as most likely.