Wholesale Prices Were Better Than Expected In July. Expectations Of a Rate Hike Decreased Further.

Expectations for an interest rate hike from the Federal Reserve decreased even further after wholesale inflation remained flat in July.

Figures from the CME Group's Fed Watch tool stood at 67.9%, compared to 59.4% on Wednesday. Expectations for an increase to the 3.75%-4% benchmark declined to 32.1%, compared to 40.6% the day prior.

The Producer Price Index stood below expectations from the Dow Jones consensus estimate, which expected a 0.2% increase.

The Bureau of Labor Statistics noted that, excluding more volatile items like food and energy, the core producer price index rose 0.2%. The figure was also below expectations, which stood at 0.3%.

The inter-annual headline PPI increased 4.7% for the all-items index, while the core figure was 4.2%.

Headline and core inflation also provided an encouraging sign, rising 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. It is unclear whether the newest figures will be enough for them to vote to keep rates unchanged.

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.