Economy

The New York Fed's August 2026 Survey of Consumer Expectations found that consumers' mean probability of higher unemployment one year ahead rose to 44.4%, its highest reading since April 2020, while one-year inflation expectations held unchanged at 3.6% and five-year expectations stayed at 3.0%. Household financial conditions also weakened, with 32.6% of respondents expecting their finances to worsen over the next year, up from 30.3% in July, and the probability of missing a minimum debt payment rising to 13.2%. The divergence between stable but above-target inflation expectations and deteriorating labor market and household financial sentiment arrives directly ahead of the FOMC's September 15–16 meeting, where three regional Fed presidents have already dissented or called for higher rates.

A Reuters poll of 65 economists conducted in early September finds near-unanimous agreement that the Bank of England will keep its Bank Rate at 3.75% through at least mid-2027, with the first cut now expected in the third quarter of 2027, later than forecast in August. The delay is driven by energy price pressures tied to the U.S.-Israeli conflict with Iran, which has pushed Brent crude toward $100 a barrel, though economists see no evidence yet of broader second-round inflation effects. This consensus stands in direct contrast to financial market pricing, which anticipates three rate hikes through mid-2027 rather than a hold.

The NFIB Small Business Optimism Index fell 1.1 points to 98.7 in August 2026, pulled down by a 5-point drop in expectations for economic improvement, a 3-point decline in earnings trends, and a 3-point fall in hiring plans. Despite the broad softening across six of ten index components, the reading stays above the survey's 52-year historical average of 98.0, keeping overall sentiment in positive territory. Price-raising activity remained elevated, with a net 31% of owners reporting higher selling prices, more than double the historical average of 14%.

The Federal Reserve Board has scheduled a closed noon meeting on September 9, 2026, to review the primary credit rate, currently at 3.75 percent, seven days before the September 15–16 FOMC meeting. The discount rate and federal-funds rate are set through separate processes, and a Board decision on the former does not signal a change in the latter. The primary credit rate has held at 3.75 percent across six consecutive Board meetings from April through July 2026, with no outcome from the September 9 meeting yet on the public record.

Canada applied retaliatory tariffs of 15%, 25%, and 50% on $27.6 billion of U.S. imports on September 8, matching U.S. Section 338 tariffs that took effect August 22 on Canadian goods including motor vehicles, dairy, and alcoholic beverages. The U.S. has issued a partial exclusion covering certain Canadian products, effective September 29, though the confirmed scope extends only to motorcycles over 800cc, with alcohol and dairy coverage not fully documented in available annexes. A further escalation to 50% tariffs on Canadian automotive goods and steel has been announced for January 1, 2027, though no formal legal instrument implementing that increase has been established in the public record.