The Week Ahead: Minutes and Midterms

US economic data indicates a trend of slow disinflation and resilient consumer spending, reinforcing the Federal Reserve's current policy trajectory. Recent PCE revisions normalize inflation metrics and suggest more sustainable growth, while labor market data reflects supply-driven employment gains and limited wage pressure, consistent with a flatter Phillips curve. Despite strong ISM manufacturing figures, cost pressures appear contained within a services-dominated economy. Looking toward the midterm elections, a shift in congressional control could mitigate risks of fiscal slippage, such as unfunded military spending, though significant fiscal consolidation remains unlikely as political attention pivots toward the 2028 presidential cycle. The Fed remains focused on preventing second-round inflation effects, with officials closely monitoring energy prices and long-term inflation expectations to maintain credibility and avoid the necessity of a recessionary policy response.