Iranian-American economist and chief economist of Moody's Analytics
Deficits have expanded to around $2 trillion for the 2026 fiscal year, with net interest costs topping $1 trillion. Analysts warn a self-reinforcing cycle of higher rates and borrowing costs is unfolding, threatening fiscal stability. Receipts from taxes are up modestly, but Social Security and Medicare remain the largest outlays.
July's jobs report has shown the unemployment rate falling to about 4.1% while long-term unemployment has dropped to roughly 1.8 million. Economists say the decline has been driven by 264,000 people leaving the labor force and a five-year low in participation, signaling discouraged jobseekers rather than stronger hiring.
Warsh has moved to reduce forward guidance and may cut meetings, aiming to give the Fed more flexibility as markets react to his new approach while inflation remains above target.
The Federal Reserve has kept the benchmark rate steady in a nine-to-three vote, amid persistent inflation above the 2% goal. Dissenters argue for earlier tightening, while others urge patience; investors await July inflation data to gauge the path for policy.
Goldman Sachs economists have assessed AI investment's macro impact, finding that crowding out of other tech spending and higher borrowing costs exist but are smaller than media narratives suggest. They project AI capex will modestly boost GDP while shifting some resources from non-AI projects.
The government has released data showing July inflation easing to 3.4% year over year, with core inflation cooling to about 2.5%. Gas prices have fallen but are rising again, leaving the path ahead uncertain. Services costs continue to outpace headline trends, underscoring lingering price pressures as the economy navigates a fragile balance.
Federal Reserve Chair Kevin Warsh has told the Jackson Hole symposium that recent inflation readings have not shown that underlying trends have meaningfully improved and that short-term rates remain the Fed's primary tool. Markets have pushed up Treasury yields and raised odds of a September rate increase as officials debate whether to tighten policy.
The Federal Reserve has raised the federal funds rate by a quarter point to 3.75%-4.0% to tame inflation. The move will ripple through borrowing costs and savers. Credit-card rates, car loans, and mortgage-finance costs are likely to rise, while savers may enjoy higher deposit yields. The hike is the first since July 2023 and follows energy-price pressures.
The Federal Reserve has raised its benchmark rate by a quarter-point for the first time since 2023, moving the target to 3.75%-4.00%. Inflation remains above the 2% goal, and policymakers say they will slow spending and cooling the economy. Borrowers will pay more on mortgages and credit cards, while savers are likely to see higher returns on savings accounts and CDs.
The CPI has risen to 3.7% over the past year, with a 0.6% monthly gain, driven by higher energy and fuel costs amid the Iran conflict. Core CPI has accelerated to 2.6%, complicating the Fed’s rate decisions as markets price in further hikes.