Fed’s preferred inflation gauge remains flat at 3.7 percent in July

The Federal Reserve’s preferred measure of inflation remained flat in July, according to data from the Bureau of Economic Analysis released Wednesday.

The personal consumption expenditures (PCE) price index ticked up 0.2 percent last month, rising 3.7 percent compared to the same time last year. Excluding more volatile food and energy prices, inflation rose 3.3 percent year-over-year in July.

This was in line with June’s numbers, which also saw annual inflation come in at 3.7 percent year-over-year.

Another measure of inflation, known as the consumer price index (CPI), eased slightly in July. The data, released by the Bureau of Labor Statistics in mid-August, found that prices ticked up 0.1 percent last month, while the annual inflation rate dipped to 3.4 percent year-over-year.

Both inflation gauges surged to three-year highs in May before ticking down in June, as the U.S. and Iran agreed to a pause in hostilities. This caused oil prices to drop amid hopes the Strait of Hormuz would reopen. The crucial waterway previously transported about a fifth of the world’s oil.

However, the two sides began trading strikes once again in July, causing oil prices to climb back up.

The Trump administration more recently has sought to increase economic pressure on Iran, warning countries to cut off financial ties with Tehran in what it is calling a financial “D-Day.”

The Fed, which has struggled to wrangle persistent inflation down to its target rate of 2 percent, opted in late July to hold interest rates steady for the fifth time in a row. The decision was split, with three officials voting to raise rates by a quarter point.

The minutes from the meeting, released last week, noted that most officials anticipated inflation would “step down over the rest of the year.” However, “many” saw the possibility it could remain elevated.

“Many participants assessed that policy tightening would likely be necessary if inflation did not decline,” the minutes added.

Traders are currently pricing in about a 60 percent chance that the Fed maintains interest rates at their current level again in mid-September, when the rate-setting panel is scheduled to meet next.