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21h ago

Economy Set for 2.3% Q2 Rebound After Tariff-Fueled Q1 Slump

Markets expect the Federal Reserve to hold rates with June’s inflation at 2.7%.

Tariff-driven buying frenzies at the beginning of the year have made it difficult to asses the underlying health and direction of the world’s largest economy.
FILE - A sheet of new $1 bills is seen, Nov. 15, 2017, at the Bureau of Engraving and Printing in Washington. (AP Photo/Jacquelyn Martin, File)
A man walks on the esplanade of La Defense in the financial and business district of La Defense, near Paris, France, January 27, 2025. REUTERS/Sarah Meyssonnier/ File Photo
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Overview

  • Real GDP fell 0.5% in Q1 after businesses front-loaded imports to evade new tariffs.
  • Economists forecast a 2.3% annualized gain in Q2 driven largely by reduced import volumes.
  • The consumer price index climbed to 2.7% in June, maintaining inflation above the Federal Reserve’s 2% goal.
  • Labor markets remain tight with the unemployment rate at 4.1%, close to decade lows.
  • The CME FedWatch Tool shows a 97% probability that the Federal Reserve will leave interest rates unchanged at its next meeting.