U.S. inflation rose less than expected in August 2026, with the core PCE price index increasing 0.2% monthly and 3.0% annually, while the broader PCE index rose 0.3% monthly and 2.6% annually. The Bureau of Economic Analysis revised July's annual PCE increase to 3.4% from 3.7% and changed its methodology for software and accessories, portfolio management fees and legal services, with historical data revised back to 2021. Consumer spending increased $190.8 billion, or 0.9%, exceeding the 0.8% forecast; inflation-adjusted spending rose 0.6%, its fastest monthly increase since March 2025. Personal income rose 0.2% to $27,627 billion, while real disposable income was unchanged. The Federal Reserve tracks PCE measures against its 2% inflation target and recently raised its benchmark rate to 3.75%-4.00%, its first increase in three years. Expectations for another increase in October weakened after the data and comments from New York Fed President John Williams, despite consumer confidence falling to a near 12-1/2-year low in September.