U.S. consumer prices rose 3.4% in July from a year earlier, matching economists' expectations and cooling further from a three-year high of 4.2% reached in May. On a monthly basis, prices edged up 0.1% after an unexpected 0.4% decline in June. Core inflation, excluding food and energy, held at 2.5% annually and 0.2% month-over-month.
The report arrives amid signs of labor market softening, with employers unexpectedly shedding 23,000 jobs in July and prior months' gains revised down by a combined 103,000. Traders see roughly even odds of a 25-basis-point rate hike next month, according to CME FedWatch.
The Federal Reserve voted 9-3 to hold rates at its July meeting. Chair Kevin Warsh has pledged to return inflation to the 2% target, while dissenter Lorie Logan argued inflation is not clearly moving toward that goal.