Headline And Core Inflation Rose In Line With Expectations In July, BLS Data Shows

Headline and core inflation rose in line with expectations in July, according to data released by the Bureau of Labor Statistics on Wednesday.

The former rose 0.1%, while the latter, which excludes more volatile components like food and energy, did so 0.2%. Annual figures stood at 3.4% and 2.5% respectively.

The figures leave inflation above the Federal Reserve's 2% target. But a second consecutive month of relatively mild price increases could strengthen the case for keeping interest rates unchanged while policymakers wait for a clearer picture of the economy.

Federal Reserve Chair Kevin Warsh is already navigating divisions among policymakers over how aggressively to respond to price increases.

At its July meeting, the Federal Open Market Committee voted 9-3 to keep its benchmark interest rate unchanged at 3.5% to 3.75%. All three dissenters wanted a quarter-point increase.

Cleveland Federal Reserve president Beth Hammack said this week that more than one interest rate hike could be needed.

Hammack, who among the minority of FOMC voters who supported increasing rates in the July meeting, told Yahoo Finance that "in general, one 25 basis point move probably doesn't do a whole lot for the economy."

"So it's probably some number of [movements]. But I don't want to prejudge what that number is going to be," she added, saying she doesn't "know exactly where we will end."

Minneapolis Fed President Neel Kashkari has also said that action is needed now. He claimed that a "potential series of small policy moves would be better than waiting and eventually concluding that even bolder actions were necessary." The third official who voted for a hike was Dallas Fed Lorie Logan, while the remaining nine favored a hold.

Among those who voted in favor of holding rates where they are, Fed Governor Lisa Cook said that even though she voted against hiking interest rates, she is ready to do so if inflation does not decrease towards the central bank's 2% goal.

Speaking during a speech in Alaska, she said she believes "the risks to the inflation side of the dual mandate higher than the risks to the employment side at this point."

"If I do not see signs of continued disinflation soon, I am prepared to act," she noted.

Another official who defended the decision was Philadelphia Fed President Anna Paulson, who said she believes the current level of interest rates is enough to drive inflation back to the central bank's goal.

Speaking to CNBC, she said that while she could reassess her position if circumstances change, the current policy "has been mildly restrictive to get underlying inflation back down to 2% in an acceptable time period." She went on to say that she needs go see "progress from here."