• On July 26th, The Federal Reserve raised their benchmark interest-rate by 25 bps, reversing a pause in
rate-hikes that occurred in June.
• While the June pause was intended to start a “wait and see” approach by officials, their meeting minutes
and commentary in recent weeks suggested to the market that they were prepared to move forward
with additional rate hikes this year. It was the 11th rate-hike since the central bank’s inflation fight began
in March 2022.
• Following the failure of three regional banks earlier this year, some officials wanted to pause and assess the
economy’s state before moving forward with additional hikes. According to its most recent projections,
on average, Fed officials estimate one more rate hike in 2023.
• Recently, Fed Chair Jerome Powell stated that stronger economic growth may lead to higher inflation,
keeping the option of further rate hikes open. In recent weeks and months, economists have, on average,
reduced their forecast for a US recession in the near term.
• US economic output beat expectations in the second quarter, with GDP growing at a 2.4% annualized
rate, up from 2.0% in the previous quarter, according to the latest data from the Bureau of Economic
Analysis (BEA).
• Resilient post-pandemic consumer spending and increased business investment were the key contributors
to the growth, with consumers leading the way as they spent on services like travel and dining.
• The strength of the economy has surprised many economists who reached consensus of an upcoming
slowdown due to high inflation and the Federal Reserve’s rate increases. In recent months, inflation
has slowed, easing pressures on policymakers and re-anchoring consumer expectations, likely fueling
additional economic activity on the margins.
• Still, some economists warn that consumer spending may slow in the second half of the year as the job
market slows and excess savings diminish. Further, the Fed remains on hawkish footing, moving forward
with an interest rate hike of 25 bps in July, increasing the potential for an economic “hard landing.”

Read the full report here.