The US Bureau of Economic Analysis (BEA) will introduce annual revisions to the Personal Consumption Expenditures (PCE) price index in September that could modestly reduce reported inflation and influence the Federal Reserve’s interest rate outlook.

Economists estimate the methodological changes would lower the core PCE inflation rate by between one-tenth and nearly three-tenths of a percentage point if applied to current data.

The revisions affect how prices are calculated for several categories, including software, legal services, and investment advice, and arrive as Fed policymakers remain divided over whether additional rate hikes are needed.

Although core PCE inflation remains elevated at 3.4% and headline PCE at 4.1%, analysts said slightly lower inflation readings, together with lower oil prices and softer labor market indicators, could reinforce the case for leaving interest rates unchanged.

The update comes as Fed Chair Kevin Warsh launches a review of the central bank’s inflation framework, including consideration of alternative measures such as trimmed-mean inflation.

Minutes from the Fed’s June policy meeting released yesterday showed officials adopted a firmer stance on inflation, reducing expectations that rate cuts are imminent.

The minutes showed broad support for holding rates steady, although a few officials said additional rate increases could be warranted if inflation remains stubborn. The Fed’s revised messaging suggests policymakers are prepared to keep borrowing costs elevated for longer unless inflation moves convincingly back toward its 2% target.