Economy

Entering today's FOMC decision, 76 percent of surveyed economists and strategists anticipated a quarter-point rate increase to a 3.75–4.00 percent target range, with markets pricing an 88.5 percent probability of that outcome. The more consequential unknowns are the updated Summary of Economic Projections and Chair Kevin Warsh's press conference, where his stance on forward guidance and whether he submitted an individual rate projection to the dot plot remain open questions. The June SEP showed a median 2026 policy rate of 3.8 percent against headline PCE inflation of 3.6 percent, figures the committee will now revise in light of a flat annual CPI reading of 3.4 percent and a July payroll decline of 23,000 jobs.

The Congressional Budget Office estimates U.S. Department of Defense direct combat costs against Iran reached $38.1 billion by August 1, 2026, with munitions replacement accounting for $21.7 billion of that total. The conflict has also depleted an estimated half to two-thirds of U.S. missile-defense interceptor inventory, with rebuilding projected to take at least five years. CBO further projects that energy disruptions from the Strait of Hormuz and Red Sea will leave PCE inflation 0.5 percentage points higher in early 2027 than previously forecast, though the agency cautions its cost figures carry considerable uncertainty because the Defense Department did not respond to its information requests.