​​​​​​​U.S. Growth Continues, But Inflation Risks Are Rising Again

Northern Trust's The Smoke Won't Clear argues that while the U.S. economy remains fundamentally resilient, renewed geopolitical tensions, higher energy prices and persistent inflation risks have made the outlook more uncertain.

• Although headline inflation eased to 3.5% in June, Northern Trust believes the improvement could prove temporary as rising oil prices, tariffs and AI-related investment continue to create upward pressure on prices.

• Consumer spending and business investment remain solid, supported by continued investment in AI infrastructure and data centres, but households are increasingly relying on lower savings to absorb higher fuel costs.

• The report expects the Federal Reserve to leave interest rates unchanged through 2027 under its base case, but warns that persistently elevated inflation could still force additional rate hikes, increasing downside risks to growth.