08.17.2026 - The Data Have Softened. The Fed's Inflation Problem Hasn't.

The Data Have Softened. The Fed's Inflation Problem Hasn't.

Inflation is cooling, but not fast enough — July CPI and PPI came in calm, yet core PCE still sits well above the Fed's 2% target. Meanwhile, the labor market is showing real cracks, with July payrolls down 23,000 and May/June revised lower by a combined 103,000 jobs. Add in slowing GDP growth and softer retail sales, and the picture for the back half of 2026 looks increasingly fragile. So where does that leave the Fed? Likely on hold at the next meeting, though one more hike by year-end isn't off the table if upcoming data disappoint. We're also watching the Gulf conflict closely — markets have grown complacent about its inflation risk, but we're not so sure that's warranted. With the yield curve ticking above 4.0% before flattening, we see this volatility creating real hedging opportunities for those positioned to act. Read our full market commentary for CIRM's take on what's next — including what to watch for at Fed Chair Warsh's Jackson Hole keynote on August 28.