US Economic Notes What you need to know for the week ahead

Economics Date 26 July 2026 US Economic Notes

What you need to know for the week ahead Brett Ryan Commentary for Monday: This week’s economic calendar heats up with the main Senior US Economist event being Wednesday’s FOMC meeting. Though our base case remains that the Fed will hold rates steady at this week’s meeting, we see significant risk of a 25bps hike given the re-escalation of conflict in the Middle East and accompanying Matthew Luzzetti, Ph.D. Chief US Economist sharp rise in energy prices over the past couple of weeks.

Indeed, measures of near-term forward market inflation compensation, Justin Weidner previously highlighted by Fed Governor Waller, have risen notably on the back of Economist the latest disruptions to energy supplies. For Fed Chair Warsh, who has emphasized the importance of market signals and reactions to incoming data, the current set of circumstances presents a difficult decision. While the initial market Amy Yang Economist reaction to the latest realized inflation data (see “US Economic Notes: June inflation recap: Getting a break from the summer heat “) was to discount the probability of the Fed hiking this week as inflation breakevens declined, market expectations began to creep back up as the cease-fire agreement between the US and Iran collapsed and energy prices surged back near their recent highs from mid-May. In turn, we will monitor developments closely over the weekend.

Recapping the results of our pre-FOMC survey (see “July FOMC survey results“), respondents attach an average probability of 71% to the Fed remaining on hold and 21% to a 25bp hike at this week’s meeting. This is the most uncertain meeting since we started our pre-FOMC survey. A plurality of respondents (43%) expect that Chair Warsh will sound neutral relative to market pricing of the Fed rate path through September, with the remainder skewing slightly towards a hawkish press conference.

Conditional on realizing the baseline of a rate-hold, respondents expect the yield curve to steepen slightly (2y UST down 2bps and 10y UST unchanged) and the S&P 500 to rise 1.0%. A surprise 25bp hike would be expected to lead 2s10s UST to flatten with the 2y and 10y rising 10bps and 5bps, respectively, alongside a 1% decline in the S&P 500. The larger yield response under the hike-scenario would be attributed primarily to information on the Committee's reaction function signaled by the policy action.

The FOMC meeting will be bracketed by several data releases that will further inform policymakers’ near-term outlooks. Monday’s durable goods orders and Tuesday’s advanced goods trade balance releases for June will sharpen expectations for Thursday’s first look at Q2 real GDP. Regarding the latter, we have lowered our tracking estimate of Q2 real GDP growth by 90bps to 1.9% (annualized). However, the downgrade to Q2 growth was entirely due to net exports, which we expect subtracted roughly 130bps from inflation-adjusted output growth last quarter due to a surge in AI-related imports. More importantly, our Q2 forecast for final sales to private domestic purchasers – our preferred measure of underlying demand – remains a very strong 3.3% — the highest reading since Q3 2024 (3.4%).

Deutsche Bank Securities Inc. IMPORTANT RESEARCH DISCLOSURES AND ANALYST CERTIFICATIONS LOCATED IN APPENDIX 1. UNTIL 19th MARCH 2021 INCOMPLETE DISCLOSURE INFORMATION MAY HAVE BEEN DISPLAYED, PLEASE SEE APPENDIX 1 FOR FURTHER DETAILS.

26 July 2026 US Economic Notes

The June personal income and consumption report will accompany the Q2 GDP release, providing the latest reading on the core PCE deflator, the Fed’s preferred inflation metric. As we discussed in our most recent inflation chartbook, the latest CPI, PPI and import price data point to a +0.19% reading on June core PCE, which would correspond to 3.3% year-over-year growth rate barring any revisions.

Friday’s employment cost index (ECI) will provide Fed officials with further important insight into the inflation outlook. Should our ECI forecast come close to the mark, the year-over-year growth rate of the series would remain steady at 3.4% - a level that most monetary policymakers are likely to view as consistent with…