Federal Reserve and ECB warn inflation remains above targets amid slowing labor supply

The U.S. Federal Reserve’s July 2026 Monetary Policy Report said inflation continues to run above the 2% goal while labor‑force growth slows due to demographic shifts. The economy is projected to keep expanding, supported by technology and AI investments, but Middle‑East conflicts and U.S. tariffs are weighing on global growth. The housing market remains weak and credit conditions stay tight, although bank lending grew in the first half of the year and the financial system is judged resilient.

European Central Bank minutes from the same period show all members agreeing that inflation risks are still upward‑biased and likely to stay above target into early 2027. The ECB foresees roughly three 25‑basis‑point rate hikes, stresses the importance of energy prices, and notes that tighter credit standards could curb investment. Despite the war in the Middle East, its impact on the euro‑area economy has so far been limited.