By Jennifer Schonberger

The Federal Reserve’s preferred gauge showed inflation heated up in April, as the conflict in the Middle East pushed oil prices higher. The report reinforces that the central bank will remain firmly on hold until there is evidence that inflation is receding.

The Personal Consumption Expenditures Index rose 3.8% in April, in line with expectations and up from 3.5% in March. Excluding volatile food and energy prices on a so-called “core” basis, PCE was up 3.3%, also in line with expectations, and up a tenth from 3.2% in March. Still, that’s the highest level in two-and-a-half years.

The estimates are in line with Fed officials’ expectations, many of whom have said inflation is moving in the wrong direction and that the risks are shifting from a balance between inflation and deterioration in the job market to a greater concern about rising prices.

Most Fed officials see holding interest rates steady for now, with a growing chorus not ruling out a rate hike if inflation becomes persistent.

Federal Reserve Governor Lisa Cook is in that camp. She said in a speech Wednesday that she’s closely watching the risk that companies could embed higher energy costs into the prices they set while workers incorporate them into the wages they negotiate. She noted that she’s “prepared to raise rates” if inflation doesn’t fall in a “timely manner.”

Cook’s comments follow Fed Governor Chris Waller last Friday, who said he’s looking to hold rates steady in the near term because he’s become concerned higher oil prices could have a lasting impact on inflation, but can’t rule out rate hikes if inflation doesn’t come back down.

Waller, who for some time was more worried about the job market and was one of the most dovish members of the Fed, supporting rate cuts, now says inflation is his bigger concern. He’s joined four other members on the committee — Boston Fed’s Susan Collins, Dallas Fed’s Lorie Logan, Minneapolis Fed’s Neel Kashkari and Cleveland Fed’s Beth Hammack — in the desire to change language in the Fed’s policy statement that reflects the next move could be a rate cut or a hike.

Fed Vice Chair Philip Jefferson said Wednesday night he expects inflation to decline later this year as the effects of tariffs and the energy shock wane, but he views risks to the upside around the inflation outlook. He’s also watching whether higher energy prices will start to weigh on consumer spending.

The 2-year Treasury yield, a leading indicator of the Fed’s interest rate policy, remains around 4% this week, 25 basis points above the upper end of the Fed’s target range of 3.5%-3.75%. The bond market is pricing in higher inflation and the prospect of one rate hike this year.

Jennifer Schonberger is a veteran financial journalist covering markets, the economy, and investing. At Yahoo Finance, she covers the Federal Reserve, Congress, the White House, the Treasury, the SEC, the economy, cryptocurrencies, and the intersection of Washington policy with finance. Follow her on X @Jenniferisms and on Instagram.