US economic activity expanded at a solid pace.
- US economic activity on balance appears to have expanded at a solid pace in the 1st half of the year
- expects further gradual rate hikes consistent with goals
- valuations still elevated for range of assets
- global risks include intensification of trade tensions
- fiscal policy likely to give GDP moderate boost this year
- borrowing among highly leverage firms is elevated
- Outlook for higher inflation appears to be on track
- some major EM economies continue to harbor vulnerabilities
- treasury market not disrupted by balance sheet rolloff
- sees labor market strong, hourly pay gains moderate
- commercial property valuations continue to be stretched
- global risks include intensification of trade tensions
- drag on GDP from higher oil prices likely to be smaller
- real disposable personal income has increased at solid rate of about 3% this year, supported by tax cuts and labor market strength, helping maintain household spending
- Fed repeats gradual rate rises will be consistent with sustained expansion
- financial system remains resilient with treasury markets broadly stable, minimal evidence of liquidity pressures
- inflation on track to rise to Fed goal with core PCE hitting 2% for the 12 months through May
The Fed report is a head of Gov. Powell's semiannual testimony to Congress next week.
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