Economy

Analysis of the US Treasury curve bear-steepening through July 2026 finds that nominal yields rose faster than real yields while real yields also rose modestly, a pattern indicating that breakeven inflation, term premium, and real rates all moved higher at the same time rather than just one component. The 30-year yield reached 5.183% on May 19, its highest since 2007, with Brent crude up 55% from late February as the primary transmission channel through oil prices into inflation expectations and Fed rate-path uncertainty. The term premium component is assessed as structurally elevated by fiscal supply dynamics independent of the conflict, meaning it is unlikely to fully reverse even if geopolitical risk subsides.

China's central bank reaffirmed its accommodative monetary policy stance on July 8 without cutting the LPR or RRR, delivering accommodation instead through corridor narrowing, overnight reverse repo operations, and a 2.5x expansion of the Hong Kong RMB Business Facility from RMB200 billion to RMB500 billion. The July 15 NBS release of Q2 GDP and June retail sales is the key validation test, since the PBOC explicitly flagged weak demand as the primary risk and pledged to revive domestic consumption. If retail sales underperforms, the unchanged LPR will face direct pressure ahead of the July 20 fixing, the first concrete decision point for whether the accommodative framing holds into the second half of 2026.

The New York Fed's June 2026 Survey of Consumer Expectations shows median one-year-ahead inflation expectations climbed 0.2 percentage points to 3.7%, while the three-year median reached 3.3%, its highest since June 2022; the five-year median held steady at 3.0%, suggesting longer-run expectations remain anchored. The release arrives as the May 2026 PCE index re-accelerated to 4.1% year-over-year and the FOMC held its rate target at 3.5–3.75% while signaling possible hikes later in the year. Notably, the three major household surveys disagree on direction this month: the SCE one-year median rose, the University of Michigan one-year median fell from 4.8% to 4.6%, and the Conference Board described its measure as 'less elevated' without publishing a specific figure.

The Section 122 global surcharge expires automatically on July 24, 2026, and the Federal Circuit appeal is on track to produce a merits ruling only after that date, making the live tariff question largely moot. The administration has already built its replacement architecture: Section 301 forced-labor investigations covering 60 economies and more than 99 percent of U.S. imports at rates of 10 to 37.5 percent, plus expanded Section 232 industrial tariffs that remain legally untouched by either the Court of International Trade ruling or the appellate stay. Importers and customs planners should treat Section 301 and Section 232 as the operative post-July 24 regime, with the Federal Circuit case continuing primarily as precedent for future Section 122 invocations and as the basis for refund claims by the three plaintiffs with standing.