US Inflation Stays Above Fed Target in August as Spending Jumps

The U.S. Bureau of Economic Analysis reported on September 30, 2026 that the Federal Reserve's preferred inflation gauge, the personal consumption expenditures price index, rose 0.3% in August and 3.4% over the past year, remaining well above the Fed's 2% target even as consumer spending recorded its strongest monthly increase in more than a year.⁷²⁴

The inflation numbers

According to the Bureau of Economic Analysis, the PCE price index increased 0.3 percent from the preceding month in August, putting the annual rate at 3.4 percent. Core PCE, which excludes food and energy, rose 0.2 percent monthly and 3.0 percent from a year earlier. CNBC noted that Fed officials generally regard core PCE as the better gauge of longer-term trends, even though the central bank officially tracks the headline figure.⁷²

CNN reported the same headline figures - a 0.3% monthly rise and an annual rate holding at 3.4% - and described inflation as remaining stubbornly elevated. Fox Business characterized the gauge as having cooled from July to August but said it stayed elevated well above target, while MarketWatch, in contrast, described the main inflation gauge as having risen sharply in August, a framing not corroborated by the other outlets in the dossier.¹⁴³

Dow Jones economists had forecast a 0.3% monthly and 3.7% annual increase in headline PCE, according to CNBC, while LSEG-polled economists had expected a 0.4% monthly headline gain, according to Fox Business. The BEA's official reading of 0.3% monthly and 3.4% annual came in below at least one of these forecasts.²⁴

Spending, income and savings

The BEA said real, inflation-adjusted personal consumption expenditures rose $92.8 billion, or 0.6 percent, in August. CNN characterized this as the fastest monthly increase in more than a year, and NBC News noted it marked the largest single-month rise in personal spending since March 2025. Overall personal consumption expenditures rose $190.8 billion, or 0.9 percent, in nominal terms, with spending on goods up $114.1 billion and spending on services up $76.7 billion.⁷¹⁶

Personal income rose $66.6 billion, or 0.2 percent, in August, according to the BEA, which said the increase primarily reflected gains in compensation and government social benefits. CNBC reported this fell short of a consensus forecast of a 0.4 percent increase. Disposable personal income rose $68.6 billion, or 0.3 percent. The personal saving rate stood at 4.1 percent, which CNN described as a nearly four-year low.⁷²¹

Fed outlook and market reaction

MarketWatch reported that the Federal Reserve raised interest rates earlier in September for the first time in three years, a claim not repeated by other sources in the dossier. CNBC said the Fed may raise rates again at its October or December meetings. After the report came out, traders using the CME FedWatch tool cut the likelihood of an October rate increase to 35 percent from 51 percent, NBC News reported, while FXStreet noted that traders broadly scaled back expectations for an October hike, weakening the dollar and pushing Treasury yields down.³²⁶⁵

Stock markets rallied after the inflation data, with the Dow, S&P 500 and Nasdaq all bouncing, according to NBC News. CNN linked continued elevated inflation to an ongoing Iran war that it said was lifting energy prices. FXStreet reported that diesel prices in the UK and US had hit record highs since the August data was collected, and said inflation pressures had escalated further into September.⁶¹⁵