The Fed warned that the risk of a persistently high inflation continues to weigh on labor market issues, amid the ongoing wave of investments in artificial intelligence, as well as tariffs and conflicts in the Middle East.
The U.S. Federal Reserve (the Fed) disclosed on July 15 its concerns about inflation, in a context of rising energy prices due to the Middle East conflict and a decrease in consumer spending.
The Federal Reserve Governor, Lisa Cook, said she was “ready to act” if inflation shows no signs of slowing. She reaffirmed her commitment to bringing inflation back to its target, while stressing the need for prudence and close monitoring of how the situation evolves.
Cook warned that the risk of a strong inflation remains more important than labor market difficulties, due to the ongoing wave of investments in artificial intelligence, as well as tariffs and conflicts in the Middle East. She estimated that inflation this year will be about one percentage point higher than last year’s forecast.
Meanwhile, the Beige Book report, published on the same day, showed that businesses and organizations expect the economy to continue to grow overall in the coming months, but that consumers reduce their nonessential spending due to the burden of higher fuel prices.
According to the report, consumer spending rose slightly, but the surge in prices, notably for fuel, restrained sales in many other categories. In some regions, discretionary spending fell or consumers shifted toward cheaper products.
Regarding the labor market, the report showed that employment advanced without putting upward pressure on wages. The Federal Reserve Bank of Minneapolis noted that the price of gasoline weighed on the finances of many workers. The Federal Reserve Bank of St. Louis indicated that some employers in Memphis had not raised wages in the past three months, despite repeated requests from employees.
Data released this week indicate that Consumer Price Inflation is expected to be 3.5% in June 2026, down from May 2026 thanks to the fall in energy prices amid expectations of an agreement between the United States and Iran.
