U.S. Growth Moderates to 1.5% in Q2 Amid Strong Domestic Demand

The U.S. economy grew at a 1.5% annualized rate in the second quarter of 2026, a pace that suggests a cooling from previous periods despite underlying strengths in domestic demand. While the headline Gross Domestic Product (GDP) figure was held back by a surge in imports, consumer spending remained a primary engine of growth, increasing at a robust 3.2% pace. Furthermore, business investment in equipment showed remarkable strength, rising at a 15.2% rate, indicating that corporations continue to spend on modernization despite higher borrowing costs.

Central banks globally are grappling with persistent inflationary pressures. In the United Kingdom, the Bank of England's July meeting minutes revealed scenarios that include a high probability of two additional rate hikes by the third quarter of 2027 to stabilize prices. Meanwhile, in the U.S., Federal Reserve officials like St. Louis Fed President Alberto Musalem have suggested that the recent Treasury selloff signals a need for the central bank to bolster its inflation-fighting credibility. The global focus remains on balancing growth with the necessity of restrictive monetary policy to return inflation to target levels.