The Federal Reserve's semi annual report shows that in 2026, the US economy will steadily expand driven by high-tech investment and government spending, with AI related data center investment driving factory output growth. The housing market is stagnant, and the external economy is dragged down by the Middle East conflict and tariffs. The labor market is stable, with wage and productivity growth. The slowdown in immigration has led to a decrease in labor supply, and small businesses and households are facing tight credit conditions. Inflation is at a high level, and asset prices are higher than historical norms. The financial system is stable, banks have sufficient reserves, and the private credit market is operating normally. Long term inflation expectations are anchored around the 2% target, and the uncertainty brought about by the Iran war is the main risk.
