US economy grows just 1.5% in Q2 2026, missing forecasts as inflation worries mount

The US economy turned in a disappointing performance in the second quarter, growing at an annualized rate of just 1.5% according to the Bureau of Economic Analysis advance estimate released on July 30. That’s a meaningful step down from Q1’s 2.1% pace and a clear miss against the economist consensus forecast, which had also called for 2.1%. What dragged growth lower Government spending declined, investment weakened, and exports lost momentum. Consumer spending partially offset those declines. Imports increased more sharply than in the prior quarter, and since imports subtract from GDP calculations, that added extra downward pressure on the headline figure. Rising energy prices added another layer of complication. Higher costs at the pump and on utility bills eat into both consumer purchasing power and business margins. The Fed’s impossible puzzle Growth is slowing. Inflation concerns are persistent. These two facts point in opposite directions when it comes to interest rate policy. If the Fed focuses on the growth slowdown, it should consider easing. If it focuses on inflation, particularly the energy-driven variety, it should hold firm or even tighten. When the entire forecasting ...