Key inflation gauge shows price hikes remained low in July

An inflation gauge closely tracked by the Federal Reserve remained low last month, adding to signs of cooling price increases and raising the likelihood that the Fed will leave interest rates unchanged when it next meets in late September.

Thursday's report from the Commerce Department showed that prices rose just 0.2% from June to July, the third straight modest increase. Compared with a year earlier, prices rose 3.3% in July, up from a 3% annual increase in June. The year-over-year figure, though, is down sharply from the 7% peak it reached a year ago, though still above the Fed's 2% inflation target. It rose partly because of much smaller price increases a year ago.

"These data confirm what markets already knew: the consumer remains strong due to a resilient labor market and disinflation continues despite a small energy related uptick over the summer,"said Jamie Cox, managing partner for Harris Financial Group in a note.