🇺🇸 The U.S. economy grew by 1.5% year-over-year—exactly as expected, but significantly slower than the 2.1% in the first quarter. At the same time, inflation came in higher than expected:
- Total PCE inflation: 3.7% in July, compared to an expected 3.6%
- Core rate: 3.3%, as expected
- Personal income: +0.4% monthly
- Real consumption: 0.0%
At least we’re heading in the right direction: In May, the inflation rate was still 4.1%. Nevertheless, the rate is still nearly twice as high than the Fed’s 2% target.
What does this mean for the stock market?
If growth were slowing, a rate cut would be the usual response. But with inflation at 3.7%, a rate cut would likely intensify price pressures.
This dilemma could explain why the Fed, on July 29, decided to 9 to 3 to keep interest rates steady—and all three dissenting votes were in favor of a hike , not for a cut.
On Friday, Kevin Warsh will speak for the first time in Jackson Hole (a gathering of the world’s leading central bank governors and economists)—his tone is likely to shape expectations for September 16 (the next interest rate decision).
https://www.bea.gov/news/2026/gdp-second-estimate-and-corporate-profits-2nd-quarter-2026
https://www.bea.gov/news/2026/personal-income-and-outlays-july-2026