Inflation cooled in June, according to the Federal Reserve’s preferred gauge, as a temporary easing of the U.S.-Iran military conflict drove energy prices down.

But the personal consumption expenditures (PCE) price index remains well above the Fed’s 2% target, posing ongoing challenges for a divided central bank that voted 9-3 on Wednesday to leave interest rates unchanged.

PCE inflation rose 3.7% over the 12 months ending in June, a decline from May’s 4.1% mark and also lower than April’s 3.8% reading. Core PCE, which omits volatile food and energy prices, increased 3.3% from a year ago versus 3.4% annual growth in May.

Both headline and core PCE clocked in slightly below consensus estimates. Economists polled by FactSet had predicted a 3.8% annual gain in the overall price index and a 3.4% rise in core PCE.

On a monthly basis, headline PCE ticked down 0.1% from May while core PCE increased 0.1%.

The monthly data release from the U.S. Commerce Department’s Bureau of Economic Analysis also tracks consumer spending, which was resilient in June.

Personal consumption expenditures increased by $65.2 billion, or 0.3%, during the month. Real PCE, which adjusts for inflation, increased by $68 billion, or 0.4%.

The upswing in spending came despite a $48.1 billion drop in expenditures for gasoline and other energy goods, as updated ceasefire conditions agreed upon by the U.S. and Iran in mid-June sent oil prices plunging and eased consumer pain at the gas pumps.

That relief may prove to be short-lived, however, after the collapse of the U.S.-Iran truce in early July rocketed oil prices higher, which will be reflected in the next PCE print.

This week’s decision by the central bank’s Federal Open Market Committee (FOMC) to leave interest rates unchanged was among the most contentious votes in recent years. The dissents by regional Federal Reserve presidents Beth Hammack, Neel Kashkari and Lorie Logan suggest that inflation hawks are gaining influence among the 12 voting members of the committee.

In comments shared with Scotsman Guide following Wednesday’s rate decision, Mike Fratantoni of the Mortgage Bankers Association expressed his belief that a rate hike will arrive by year-end.

“The FOMC’s decision to hold the federal funds target at its current level, coupled with the three dissents at this meeting, with each of these dissenting members preferring to hike rates now, indicates that the Fed is likely moving into a hiking cycle soon,” the MBA’s chief economist stated. “Markets are now expecting they could start hiking before the end of the year.”