The Federal Open Market Committee (FOMC) met today to assess the state of the US economy and monetary policy. As markets expected, the FOMC raised the Federal Funds Target Rate by 25 bps to 3.75-4.00%. Data released since the July meeting supports the decision. The unemployment rate stands near multi-year lows and underlying consumer price inflation persists above the Fed’s 2% target. The US-Iranian conflict (refuses to go away) and tariff pass-through (omnipresent) muddle the inflation picture while a resilient consumer (firm labor market, wealth effect), AI investment (record-scale capital deployment), and fiscal policy (expanding) are key drivers of nominal growth. Together, these elements increasingly complicate the economic outlook. The Fed raised the policy rate today to take a step toward achieving the inflation side of the dual mandate. The committee will continue to evaluate how the current environment and incoming data affect the economy and the balance of risks.

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