WASHINGTON — The U.S. economy continues to expand in 2026, but persistent inflation remains a central issue for consumers, businesses and Federal Reserve policymakers.
According to the U.S. Bureau of Economic Analysis, real gross domestic product increased at an annual rate of 1.5% in the second quarter of 2026. Personal income rose 0.4% in July, while the country recorded an $88.6 billion international trade deficit in goods and services during the same month.
Inflation data released by the Bureau of Labor Statistics show that the Consumer Price Index increased 0.4% in August and was 3.4% higher than a year earlier. Excluding food and energy, consumer prices rose 0.3% during August and 2.4% over the previous 12 months.
The labor market, meanwhile, remained relatively stable. The unemployment rate stood at 4.1% in August, while preliminary figures showed nonfarm payroll employment increasing by 162,000 during the month.
Those figures illustrate the balancing act facing the Federal Reserve: maintaining economic growth and employment while attempting to bring inflation closer to its longer-term 2% objective.
In economic projections released following the September 15–16 Federal Open Market Committee meeting, participating Federal Reserve officials projected a median 2.3% increase in real GDP for 2026 and an unemployment rate of 4.1% in the fourth quarter. Their median projection for PCE inflation was 3.7% for the year, while core PCE inflation was projected at 3.4%.
The projections are not guarantees. They represent individual Federal Reserve participants’ assessments based on available information and assumptions about appropriate monetary policy.
For American households, the economic picture remains mixed. Continued employment and economic expansion provide support for consumer activity, but higher prices can reduce purchasing power, particularly for essential expenses.
Businesses are also navigating borrowing costs, wage pressures, trade conditions and rapidly changing investment requirements associated with artificial intelligence, energy infrastructure and advanced manufacturing.
The direction of inflation during the final months of 2026 will therefore be closely watched both inside the United States and abroad. Because of the dollar’s central role in international finance and the size of the U.S. economy, changes in American monetary policy can affect capital markets, currencies and investment decisions around the world.