Monthly Economic Headlines

Fed holds rates steady, but signals inflation concerns.

The Federal Reserve maintained interest rates at 3.50%–3.75% amidst a 9–3 vote split at the July 2026 meeting. Dissenters argued for a rate increase given inflation remains above the 2% target. The Fed provided little forward guidance, but noted economic activity is persisting at a solid pace while the labor force has seen some weakness.

Long term treasury yields are rising.

Yields on 10-year and 30-year Treasury bonds rose notably in July as inflation concerns, geopolitical uncertainty, and fiscal pressures weighed on investors. The ongoing war in Iran and broader shifts in global supply chains have increased inflation risks, while the Fed’s decision to hold rates steady in August appeared at odds with its strong rhetoric on controlling prices. Rising federal deficits may also be contributing to higher long-term rates by increasing the supply of Treasury securities relative to investor demand.

Economy expands, but rising trade deficits dampen growth.

The advanced estimate for Gross Domestic Product (GDP) came in at 1.5% in Q2 2026, a notable decline from 2.1% in Q1 2026. A surge in imports offset relative strength in consumer spending. Companies are frontloading imports ahead of typical seasonal demand trends to avoid potential tariffs.

Labor data is mixed.

While the labor market remains largely resilient, the labor force participation rate has fallen rapidly (see chart below). Statistical revisions to population data, an aging population, lower immigration levels, and moderate declines in prime-age workers are driving this trend.

Labor force participation rate

Source: Bureau of Labor Statistics.

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