Federal Reserve Semiannual Report: Inflation Remains Elevated, M2 Money Supply Growth Moderate

Odaily Odaily reported that the Federal Reserve released its semiannual report, which stated: The labor market is generally stable, with "solid" nominal wage growth accompanied by "strong" productivity improvements. Under reserve management purchase operations, bank reserves remain in the "ample" range. Long-term inflation expectations are "broadly consistent" with the 2% target. Growth in the first quarter of 2026 was driven by high-tech investment and government spending, while labor supply growth has slowed due to放缓 immigration and demographic changes.

In the first half of 2026, external economic activity growth was sluggish, impacted by headwinds from the Middle East conflict and US tariffs, but was partially offset by AI investment. Inflation, which was already strong, accelerated further in the spring. Inflation remains elevated, primarily driven by tariffs, the Middle East war, and AI-related factors. M2 money supply growth was moderate, broadly similar to typical growth rates in the 2010s. Small businesses and households continue to face relatively tight credit conditions.

The financial system remains "sound and resilient," with vulnerabilities unchanged. Despite higher uncertainty due to the war with Iran, economic activity continues to expand at a solid pace. Asset values for equities, corporate debt, and residential real estate are above historical norms. (Jin Shi)