The core consumer price index rose 0.2% for a second month.
It was the first Wall Street bank to officially reverse its call amid growing optimism.
The employment cost index, a broad gauge of wages and benefits, increased just 1% in the second quarter.
The Federal Reserve's preferred underlying inflation metric advanced at a slower-than-expected 3.8% pace.
More consumers said jobs were “plentiful” in July.
The survey marks a sharp turnaround from more pessimistic responses that were taken in April.
Americans' finances remain in good shape by historical standards.
Non-revolving credit, such as loans for vehicle purchases, decreased $1.3 billion, the first decline since April 2020.
The latest figures suggest the labor market is losing some steam.
A further decline in average workweek hours risks a pickup in layoffs.
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