U.S. economy turns in sluggish 1.5% second-quarter growth and inflation remains above Fed target

The U.S. economy grew at a 1.5% annual rate in Q2 2026, below expectations and down from 2.1% in Q1. Inflation, as measured by the Fed's preferred PCE index, remained above the 2% target at 3.7% year-over-year in June 2026, though it slowed from 4.1% in May. The Federal Reserve held interest rates steady for the fifth consecutive meeting, despite dissent from three regional presidents advocating for higher rates.