Consumer prices rose 0.1% in July, as expected, putting the annual rate at 3.4%

A key inflation reading Wednesday showed prices moderating across a range of goods and services, possibly taking the urgency out of an imminent interest rate hike.

The consumer price index, part of the Federal Reserve’s inflation dashboard, showed a seasonally adjusted increase of 0.1% during July, according to the Bureau of Labor Statistics. Excluding food and energy, so-called core CPI rose 0.2%.

On an annual basis, the inflation rates were 3.4% and 2.5%.

All of the readings were line with the Dow Jones consensus forecasts.

Though the levels held well above the Fed’s 2% target, the tame monthly readings, coupled with similarly moderate levels in June, indicate that the energy-fueled burst earlier in the year is easing, though prices remain volatile and subject to constantly changing conditions in the Middle East.

Stock market futures rose following the release while Treasury yields were negative across the board. Traders further cut the probability for a September rate hike, lowering the odds to 42%, according to the CME Group’s FedWatch gauge of futures prices.

Energy prices dropped another 1.5% for the month following a 5.7% decrease in June. Still, the sector saw an annual increase of 14.7% following sharp gains in prior months, including a 10.9% surge in March just after the attacks against Iran began.

Both food and shelter saw 0.1% increases in July. Shelter costs had been stubborn and a key contributor toward keeping the inflation rate above 2%. Even with the modest gain, shelter accounted for about two-thirds of the headline increase, the BLS said.

New vehicle prices rose 0.1% while used cars and trucks increased 0.4%. Medical care was up 0.4% and airline fares accelerated by 2.2%.

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