Economy Core inflation rate hit 3.2% in March as first-quarter growth disappointed at 2%

This report shows that inflation has stubbornly remained above the Federal Reserve's target level while economic growth has been modest. During the month of March, the core PCE rose 0.3% alone and 3.2% over the past year. Inflation reached 3.5% primarily due to the surge in energy prices in the U.S. While the economy did grow 2%, which is an improvement from Q4 of 2025, it still fell a bit below expectations. Despite higher prices in the economy, the job market still remains strong. Jobless claims are at their lowest since 1969, but with higher prices, many consumers are cutting back on spending. Given consumption has been a constant in recent years, this could be troubling if this trend continues. Overall, the economy is mixed; there is good job stability and growth in sectors such as AI, but with persistent inflation and higher prices, it's weighing on households. This is making it hard for the Federal Reserve to make a decision on what to do about interest rates. 

PCE inflation rate March 2026: 

Rising Corporate Profits

Corporate profits continued to reach all-time highs in late 2025, due to the growth in technology,  the steady growth of the economy, the increase in corporate market power, and the decrease in federal tax rates.  The investment boom happening in the tech sector- largely due to A.I.-has positive effects on the profit growth of sectors like healthcare and manufacturing. The lack of a large recession, which crushes profit growth, has helped as well. Simultaneously, the growth of larger firms means they have more price power and higher profits as things become concentrated. Lastly, there has been a steady four-decade-long decrease in the federal tax rate from 46% to 21%, as well as a fall in real interest rates. All of this means fatter margins for corporations who continue to have an optimistic outlook for profit margins ahead. 

Source: https://www.nytimes.com/2026/04/18/business/dealbook/corporate-profits-record.html

How Federal Reserve Interest Rates Are Shaping the Economy

 Over the past year, Federal Reserve interest rate policy has continued to play a major role in shaping consumer spending, business investment, and overall economic growth. With inflation still above the Fed’s long-term 2% target, policymakers have kept rates elevated rather than rushing into cuts. While this strategy is designed to control inflation, it also creates real pressure on consumers and businesses. Higher borrowing costs mean more expensive mortgages, auto loans, credit cards, and business financing, which can slow spending and investment. For everyday consumers, this often means less disposable income and tighter financial decisions, while businesses may delay expansion or hiring due to increased capital costs.

At the same time, these higher rates are helping cool inflationary pressures by reducing excessive demand, which is the Fed’s primary goal. According to Reuters, Federal Reserve Chair Jerome Powell recently emphasized that the U.S. economy remains resilient, but inflation risks and external pressures continue to justify a cautious monetary stance. This suggests the Fed is prioritizing long-term price stability over short-term economic stimulus.

From a macroeconomic perspective, this reflects contractionary monetary policy, where tighter money supply can reduce inflation but may also slow GDP growth if maintained too aggressively. Moving forward, the challenge for the Fed will be balancing inflation control without pushing the economy into unnecessary slowdown. In my view, current policy shows how interest rates remain one of the strongest tools for economic stabilization, even though the effects are felt differently across households and industries.

https://www.reuters.com/business/us-economy-quite-resilient-should-keep-growing-above-2-feds-powell-says-2026-04-29/?utm_source

Oil Prices Spike and Raise Fears of Economic Slowdown - Reuters

Oil prices have recently increased tensions in the Middle East, especially around the Strait of Hormuz, an important route for global oil shipments. Because so much oil passes through this area, any disruption causes prices to rise quickly.

As oil prices go up, it becomes more expensive to transport goods and produce energy. This leads to higher prices for everyday items, which increases inflation. Many economists are worried that if prices stay high, it could slow down economic growth around the world.

This situation is an example of a supply shock, where a decrease in supply leads to higher prices. If it continues, countries could face slower growth and rising costs at the same time. 

https://www.reuters.com/world/middle-east/global-oil-prices-rise-2026

These charts show how Iran’s economy is in freefall-- CNBC

 https://www.cnbc.com/2026/04/23/iran-economy-war-charts-rial-oil-strait-hormuz-blockade.html

The conflict between the United States and Iran is creating challenges for the already weak Iranian economy, sending it into freefall. The primary Iranian tactic to combat its Middle Eastern enemies has been economic restriction, primarily through a blockade of the Strait of Hormuz, limiting around 20% of the world’s oil supply. 90% of the nation’s annual trade passes through the strait, and its closure strikes both domestic demand/imports and exports to trading partners.  The nation is facing additional economic contractions, including severe inflation. In early 2026, food prices were inflated by more than 100%, with bread and cereals at 140% and oils and fats at 219%. The IMF predicts a shrinking of the Iranian economy by 6.1% in 2026. 

Despite these predictions, economists are facing difficulty in accurately tracking Iran’s economic data. The country has not self-reported GDP since 2024 and has been faced with widespread internet blackouts that make domestic statistics inaccessible. Nonetheless, the effect that the Strait of Hormuz closure has had can still be seen from foreign perspectives. Some hope that such a drastic impact will force Iran to negotiate a quick end to the conflict out of necessity. Senior Iranian economic officials have allegedly warned President Masoud Pezeshkian that it may take more than a decade to rebuild the Iranian economy if the conflict continues, which may be an internal factor applying pressure to the possibility of peace talks.

How the AI Boom Is Raising Electricity Costs in the U.S.

Artificial intelligence is not just changing technology, it is starting to affect household bills too. Reuters reported this week that electricity demand in the U.S. is rising partly because of the huge growth in AI data centers. The Energy Information Administration expects residential electricity prices to rise 5.1% in 2026 and another 2.4% in 2027, as utilities deal with higher demand, grid upgrades, and other rising costs.

A big reason is that AI needs enormous amounts of power. Reuters reported today that utilities like Entergy are expanding spending heavily to serve major data center projects, including Meta’s operations in Louisiana. That shows how the AI boom is creating real pressure on the energy system, not just the stock market.

This matters because when power companies spend more to build plants, transmission lines, and other infrastructure, those costs can eventually affect consumers. So even if someone never uses AI much, they may still feel its economic impact through a higher electricity bill. Overall, the AI boom is becoming more than a tech story it is turning into an everyday cost issue in the U.S. economy.

https://www.reuters.com/business/energy/us-consumers-face-rising-electricity-prices-despite-clean-power-savings--reeii-2026-04-28

Fed Interest Rate Decsion

 

In its April 2026 meeting, the Federal Reserve decided to hold interest rates steady, continuing its cautious approach to monetary policy. The decision reflects ongoing uncertainty about the direction of the economy, particularly regarding inflation and overall growth.

According to the article, the Fed is still concerned that inflation has not fully returned to its target, which makes it difficult to justify cutting rates too soon. At the same time, there are signs that the economy may be slowing, which creates pressure to avoid keeping rates too high for too long.

Because of this, the Fed is taking a wait and see approach, choosing not to make any major changes until more economic data becomes available. The Fed signaled that future policy decisions will depend on incoming economic data, particularly inflation trends.

Overall, the Fed’s decision shows the challenge of balancing inflation control with economic stability. For now, policymakers are choosing caution, leaving interest rates unchanged while closely monitoring the economy.

https://www.cnbc.com/2026/04/29/fed-interest-rate-decision-april-2026.html

The Fed, Frozen

Based on recent economic trends, many people are guessing the Fed will not cut interest rates anymore. However, some people warn that this assumption may be inaccurate. The war with Iran has increased oil prices, and people fear this conflict will cause an increase in inflation. But it seems likely that this war could end fairly soon. If this does occur and prices sink back to the same level as before the war, the Fed could resume the interest rate cuts that people expected before the conflict. The Chief Economist at Oxford Economics said that he believed the Fed would wait and see how the war progresses, but he still expects interest rate cuts before the end of the year. The short-term inflation expectations are fairly high, but the long-term expectations are lower. This once more supports the idea that when the war with Iran ends, the economy will resume to where it left off before the conflict.  

Another reason it seems likely the Fed would want to cut interest rates is that the country seems to be entering a phase of slow economic growth. In order to help stimulate growth and decrease unemployment, interest rates could be cut. Overall, it seems the Fed is currently just playing a waiting game, frozen until the war is resolved. Most people suspect the war will conclude soon, and then it seems likely that interest rate cuts will resume as well. 

https://www.investopedia.com/here-are-the-reasons-why-fed-rate-cuts-are-still-possible-11951320

We spoke to over 30 central bankers, policymakers and politicians. Here are their top concerns

 The war is drawn out at this point which leaves things uncertain. Policymakers think the biggest problem is not just the war but also there is no clear end and peace talks are uncertain. Uncertainty reduces investment and consumption. Higher energy prices go into global inflation. In the end slower global demand means there is weaker growth. Many officials are now worried about Stagflation which is high inflation with low economic growth. They say energy shocks push inflation up; uncertainty and higher cots push growth down. Some estimate that the inflation could rise to 2.5%, if these stays rising stagflation could occur.

Energy security is the main channel of impact. The biggest transmission mechanism is oil and flows which is through the strait of Hormuz. This is important because large share of oil passes through it. The risks that are brough up is the supply disruptions, shipping delays, and oil price spikes. These all have a impact with the global price shock.

Central bankers, politicians warn of global risks as Iran war drags on

Rising Recession Expectations

    Lately, there has been an increase in concern about a possible recession. What’s interesting is that expectations alone can influence economic behavior. When businesses think a slowdown is coming, they may cut back on hiring or delay investments. At the same time, consumers may spend less and save more if they’re worried about job security. This can actually slow the economy before a recession even begins.

    This connects closely to business cycles, since changes in confidence can push the economy from expansion toward contraction. Overall, rising recession expectations highlights that confidence in the economy is crucial. Even without a clear downturn yet, the shift in outlook alone can start to shape real economic activity.