SF FedViews: Uncertainty Clouds the Outlook on Inflation and the Economy
The San Francisco Fed’s June 4 outlook notes that U.S. real GDP expanded 1.6% annualized in Q1 2026, trailing the 2% long‑run trend. Growth was buoyed primarily by business investment in artificial‑intelligence infrastructure, while consumer spending softened under high gasoline and grocery prices. Inflation remains elevated, with headline PCE at 3.8% and core goods inflation above 3%, driven by Middle‑East supply disruptions. The labor market stays stable at a 4.3% unemployment rate, but real wages are eroding, and markets now price potential Fed rate hikes through 2027.
SF FedViews: Prospects for AI-Related Activity Add to Uncertainty Around the Economic Outlook in 2026
Despite a fourth‑quarter slowdown to 1.4% annualized, the U.S. economy is projected to resume solid, above‑trend growth in the first half of 2026. Labor market indicators show stabilization, with January adding 130,000 jobs and the unemployment rate edging down to...