US Economy Faces 2-Sided Squeeze as Fed Signals 2 More Rate Hikes by March
Updated
Updated · Yahoo Finance · Sep 20
US Economy Faces 2-Sided Squeeze as Fed Signals 2 More Rate Hikes by March
3 articles · Updated · Yahoo Finance · Sep 20
Summary
Consumer spending and renewed Fed tightening are set to hit the US economy at the same time, challenging forecasts for steady growth through the rest of 2026.
2.5 percentage points of second-quarter growth came from real consumption, but that support looks fragile as higher inflation, weak income growth and geopolitical uncertainty curb household demand.
11% larger average tax refunds helped lift income earlier this year, adding 0.4 percentage points to 2026 GDP, but that fiscal boost is expected to fade to zero in the second half.
Two more rate hikes are priced in by March after the Fed's first increase in three years, leaving policymakers less likely to cushion a slowdown if inflation stays above target.
The likely result is higher unemployment and tighter financial conditions, with lower stock prices seen as part of the path to slower inflation.