Here are five key takeaways from the July CPI inflation report:

July data on the prices consumers pay for goods and services was largely on target Wednesday, leading traders to lower the likelihood of a September interest rate hike, even though inflation remains well above the Federal Reserve’s 2% target.

Here are five key takeaways from the Bureau of Labor Statistics report.

Hit: The Consumer Price Index rose 0.1% in the month, for an annualized rate of 3.4%. Their respective core readings were 0.2% and 2.5%. Both numbers helped fuel the narrative that while inflation is still a problem, it appears to be less of a problem after two consecutive months of positive statistics. Both June and July’s easing was largely due to the easing in the CPI energy index, which fell 7% from its historic peak in May. crude oil has risen 10% over the past week, creating an upside risk to August’s CPI readings unless the situation in the Middle East calms down. Give me shelter (?): A key factor in the rise in inflation is shelter, and there was some good news on that front. The shelter-in-place index, which accounts for about one-third of the CPI weight, has risen by just 0.1% in the past two months, providing hope on this front as well. However…much of the work in this regard has been done by the sharp decline in the “accommodation away from home” category, which has recorded sharp declines in three of the past four months. Owner-equivalent rents are an important category that determines the hypothetical rents for owner-occupied properties, and have remained fairly stable over the same period. Pre-war story: When you put all the numbers together, core inflation is currently running at the level it was before the US and Israel attacked Iran in late February. This is a very simple story. Without the Middle East turmoil, non-food and energy inflation, especially the latter, would have been right back on target. The Fed factor: Traders took that benign core number, added it to last Friday’s weak July nonfarm payrolls report, and came up with a formula that significantly lowers the chances of a rate hike at the Fed’s Sept. 15-16 policy meeting. As of late Wednesday morning, the market was pricing in just a 38% chance, down 10 points from Tuesday and well below the roughly 70% chance a month ago, according to CME Group’s FedWatch, which said December currently has the best chance.

“This makes life a little easier for the Fed, because it takes away the pressure to raise rates that everyone was expecting. Inflation appears to be calming down.” — Dan North, senior economist at Allianz Trade North America.

“We are sticking with our base case of 75 (basis points) rate hikes this year starting in[September]. However, the somewhat positive inflation data of the past two months increases the risk that rate hikes will be delayed (e.g., potentially starting[in December]) or not materialized.” — Bank of America U.S. Economist Stephen Juneau on the bank’s contrarian interest rate call.

“July’s CPI report was highly anticipated as a key data point ahead of September’s FOMC decision. However, its release is unlikely to significantly change the stance of many FOMC voters, given the factors that can influence both dovish and hawkish discourse.” — Niladri ‘Neil’ Mukherjee, Chief Investment Officer, TIAA Wealth Management.