U.S. July core PCE rose 3.3% year over year, matching expectations and unchanged from the prior reading of 3.3%.

The headline PCE index increased 3.7% year over year, compared with the 3.6% expected and 3.7% in the prior month. On a monthly basis, headline PCE rose 0.2%, versus expectations for a 0.1% increase, after a 0.1% decline in the previous month.

Core PCE, which excludes food and energy, rose 0.2% month over month, in line with expectations and up from 0.1% previously.

PCE services excluding energy and housing were unchanged from the prior reading at 0.1%.

For July, personal income increased 0.4%, above the 0.2% expected and after a 0.2% rise in the prior month. Personal spending climbed 0.2%, compared with expectations for a 0.1% increase and after a 0.3% gain in the previous month. Real personal spending was flat, following a 0.4% increase previously.

The data is the main release of the week, with markets still pricing in a 35% chance of a Federal Reserve rate hike on September 16. Recent data have generally pointed in a more dovish direction, but Federal Reserve officials remain concerned about persistent inflation, which is why the core reading in this report is closely watched. Because the PCE price index is the Fed’s preferred inflation gauge, this report tends to carry extra weight in shaping policy expectations relative to other price data.

The Federal Reserve has missed its 2% inflation target for five years, and new Chairman Kevin Warsh has made that issue a central focus. With headline inflation at 3.6%, data center spending booming and the Iran war continuing, he has work to do.

Overall, the figures were slightly hotter on the headline measure, but there were no major surprises in the report.