The US Bureau of Economic Analysis (BEA) released two closely watched reports, and together they may shift the outlook for the US Federal Reserve Board’s (Fed’s) next interest rate decision. July’s inflation figures came in where economists expected, monthly consumer spending paused and a revised look at second-quarter 2026 growth showed the US economy is holding up a little better than the headline number suggests.

• The personal consumption expenditures (PCE) price index, the Fed’s preferred inflation gauge, rose 0.2% in July versus a month earlier, in line with expectations. Core PCE, which strips out food and energy, held at 3.3% year over year, matching April’s level rather than climbing further.
• Real, inflation-adjusted consumer spending stayed flat in July, after stronger increases in May and June. The pause was driven mainly by a pullback in goods purchases, particularly gasoline, vehicles and recreational items, while spending on services such as health care, housing and financial services kept growing.
• Personal income climbed 0.4% in July, beating the expected 0.2% gain and marking a ninth consecutive monthly increase. Higher wages, government benefit payments and investment income all contributed to the rise.
• A second estimate from the BEA showed second-quarter gross domestic product growth held at an annual rate of 1.5%, unchanged from the initial estimate and down from 2.1% in the first quarter. The details were stronger though, with consumer spending revised up to 3.4% and business investment climbing 8.5%.

The data suggests inflation is stabilizing rather than reaccelerating, a welcome development for the US after the pickup seen earlier this year. However, with core inflation holding well above the Fed’s 2% target, the central bank will likely remain cautious and wait for more consistent progress before considering any change to interest rates.

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