American consumers showed resilience in July with the biggest monthly spending increase in four months, despite inflation. Household outlays rose 0.3%, driven by income growth and purchases of goods like cars and furniture. Inflation, led by tariffs on imports, raised prices, with the core PCE index hitting a 2.9% yearly pace.

Price pressures came from services while goods costs eased. Concerns about inflation intensify as trade tariffs impact the economy. Traders anticipate a Fed rate cut, with Chair Powell hinting at it in August. Consumer demand remains strong despite tariffs and high borrowing costs, with some companies warning of price hikes.

Income growth supported spending, with wages and salaries up 0.6% in July. Real disposable income increased by 0.2%, while the household saving rate remained steady. However, the labor market showed signs of slowing, sparking worries that paychecks may not keep up with rising prices. High prices, inflation, and tariff concerns affected consumer sentiment.

President Trump criticized Powell and the Fed for not cutting rates, and sought to remove Fed governor Lisa Cook to assert more control. Trump’s actions have raised questions about the Fed’s independence and its ability to navigate economic challenges. The Fed’s next interest rate decision is on September 17.

Read more at Yahoo Finance: U.S. consumer spending rises despite stubborn inflation