July 2026 Monetary Policy Report

The report now describes inflation as elevated and rising, with PCE inflation up sharply, rather than moderating. It reports moderate GDP growth instead of a pause, and notes the FOMC has cut the federal funds rate target range to 3-1/2 to 3-3/4 percent. Financial conditions have tightened, with higher Treasury yields and a stronger dollar.

Inflation

• The report now describes inflation as having risen this year and remaining elevated, rather than moderating but somewhat elevated. Read the section
  Quotes

  Previous report: “Inflation has continued to moderate this year, though it remains somewhat elevated.”

  This report: “Inflation has risen this year and remains elevated relative to the Federal Open Market Committee's (FOMC) longer-run objective of 2 percent, in part reflecting supply shocks that have driven price increases in certain sectors, including energy.”

• The 12-month PCE inflation rate is now reported at 4.1 percent in May, up from 2.1 percent in April a year earlier. Read the section
  Quotes

  Previous report: “The 12-month change in the price index for personal consumption expenditures (PCE) was 2.1 percent in April, down from 2.6 percent at the end of last year (figure 1).”

  This report: “Over the 12 months ending in May, the price index for personal consumption expenditures (PCE) rose 4.1 percent, up substantially from a 2.5 percent pace a year earlier”

• The median PCE inflation projection for the current year rose sharply from 1.4 percent in 2025 to 3.6 percent in 2026, indicating a significant upward revision. Read the section
  Quotes

  Previous report: “Median: 2025: 1.4”

  This report: “3.5- 3.6: 2026: 9”

Economic activity

• The report now reports moderate GDP growth in the first quarter, whereas previously it noted a pause in GDP growth. Read the section
  Quotes

  Previous report: “Although growth in real gross domestic product (GDP) is reported to have paused in the first quarter, growth in private domestic final demand was moderate, reflecting a modest increase in consumer spending and a jump in capital spending.”

  This report: “real gross domestic product (GDP) grew at a moderate pace in the first quarter, with capital investment rising considerably but household consumption increasing only very modestly.”

Financial conditions

• The report now says Treasury yields have increased on net since the start of the year, with the largest moves at shorter maturities, whereas the previous report described moderate declines. Read the section
  Quotes

  Previous report: “yields on 2-, 5-, and 10-year nominal Treasury securities, on net, moved moderately lower”

  This report: “Since the beginning of the year, yields on nominal Treasury securities have increased, on net, with the largest moves concentrated at shorter maturities.”

International

• The report now says the broad dollar index increased modestly, whereas the previous report said it had decreased on net. Read the section
  Quotes

  Previous report: “Since early 2025, the broad dollar index—a measure of the exchange value of the dollar against a trade-weighted basket of foreign currencies—decreased, on net, as changes in U.S. trade policy reportedly led investors to reassess U.S. growth prospects relative to other major economies (figure 46).”

  This report: “the broad dollar index—a measure of the exchange value of the dollar against a trade-weighted basket of foreign currencies—increased modestly, on net, despite some volatility amid Middle East developments”

Monetary policy

• The report now states the federal funds rate target range is 3-1/2 to 3-3/4 percent, down from 4-1/4 to 4-1/2 percent. Read the section
  Quotes

  Previous report: “the Federal Open Market Committee (FOMC) has maintained the target range for the federal funds rate at 4-1/4 to 4-1/2 percent.”

  This report: “the FOMC has maintained the target range for the federal funds rate at 3-1/2 to 3-3/4 percent since the beginning of the year.”

• The report now describes the expected federal funds rate path as shifting up notably after the Middle East conflict, whereas the previous report noted little change for 2025 and a lower path beyond. Read the section
  Quotes

  Previous report: “the expected federal funds rate path at the end of this year was little changed. Beyond 2025, the market-implied path for the federal funds rate shifted notably lower.”

  This report: “Market-based measures of the expected path of the federal funds rate showed little change early in 2026 before moving up significantly following the onset of the conflict in the Middle East”

• The report now notes the balance sheet has ticked up due to reserve management purchases of Treasury bills, a shift from the previous decline in assets. Read the section
  Quotes

  Previous report: “Since early January 2025, total Federal Reserve assets have decreased $176 billion, leaving the total size of the balance sheet at $6.7 trillion, $2.2 trillion smaller since the reduction in the size of the SOMA portfolio began in June 2022”

  This report: “Since early January 2026, the FOMC has continued reserve management purchases of Treasury bills, and as a result, the total size of the balance sheet has ticked up”

• The report introduces a new independent task force to explore the benefits and risks of the ample-reserves regime and alternative frameworks, a topic not mentioned previously. Read the section
  Quotes

  This report: “One of the new independent task forces will explore the benefits and risks associated with the current ample-reserves regime and will examine considerations related to the composition of the Federal Reserve's balance sheet as part of an assessment of alternative frameworks for the conduct and operation of monetary policy.”

These points are generated automatically by comparing the two reports' text, and each quote is checked against the report it's cited from.