Federal Reserve: AI-Related Investment Drives Strong Output Growth; Iran War Uncertainty Remains a Key Risk

Odaily reports that the Fed's semi-annual report shows the US economy maintained a generally solid expansion in 2026, driven primarily by high-tech investment and government spending. Factory output grew strongly due to AI-related data center investments, with production capacity continuing to improve. However, the housing market has stalled, and the external economy has struggled with sluggish growth weighed down by Middle East conflicts and tariffs. The labor market remains generally stable, with both wages and productivity rising, but a slowdown in immigration has led to a decline in labor supply, and small businesses and households still face tighter credit conditions.

Inflation remains high and edged higher in the spring, with asset prices above historical norms. The financial system is generally sound, bank reserves are ample, and the private credit market is functioning normally despite some redemption pressures. Long-term inflation expectations remain broadly anchored around the 2% target, but uncertainty stemming from the Iran war remains a key risk. (Jin Shi)