Federal Reserve: AI-related investment is driving strong output growth, but uncertainty over the Iran war remains a key risk

BlockBeats message. On July 10, the Federal Reserve’s six-month report showed that in 2026 overall U.S. economic activity will remain in a steady expansion, mainly driven by high-tech investment and government spending, with factory output growing strongly thanks to AI-related data center investment and production capacity continuing to improve.

However, the housing market has fallen into a standstill, and growth momentum in the external economy is weighed down by the conflict in the Middle East and tariffs. The labor market remains stable overall, with both wages and productivity rising, but slower immigration has reduced labor supply, and small businesses and households are still facing relatively tight credit conditions.

Inflation remains at a high level and rose further in the spring, with asset prices above historical norms. The financial system as a whole is sound, with banks holding sufficient reserves. Although the private credit market faces some redemption pressure, it is still operating normally. Long-term inflation expectations are basically anchored near the 2% target, but uncertainty stemming from the Iran war remains the main risk.