U.S. Economy Shows Resilience as Inflation Persists and Policy Remains Steady

Matthew Rubin Chief Investment Officer

 

1. The Fed held rates steady last week, but diverging internal views alongside persistent inflation leave the near-term policy path uncertain.
2. Inflation stayed elevated last week while growth and labor data pointed to a stable but uneven economic backdrop.
3. Jobless claims declined last week, signaling a stable labor market despite external economic pressures.

 

1. Fed Holds Rates Steady as Policy Views Split

Last week, the Federal Reserve (Fed) kept its target range for the federal funds rate at 3.50%–3.75%, in line with expectations, but internal disagreement among committee members became more visible.¹ While the FOMC maintained language suggesting the next move in rates is downward, internal divisions were evident. Three committee members favored removing the easing signal from comments, while one supported an immediate 0.25% cut, underscoring divisions amid economic uncertainty.¹

Chair Jerome Powell indicated he plans to remain on the Board of Governors after his term as chair concludes next month, pending the outcome of an ongoing review of the central bank. Meanwhile, the Senate Banking Committee advanced the nomination of Kevin Warsh as the next chair.

2. Inflation Holds Firm as Growth and Labor Data Send Mixed Signals

Last week’s data showed inflation remained elevated while broader economic indicators delivered mixed results. The Core PCE Price Index, the Fed’s preferred gauge, rose 0.3% in March, lifting the year-over-year rate to 3.2%.² Headline inflation increased 0.7% for the month and reached 3.5% annually, in line with expectations.²

At the same time, U.S. GDP expanded at a 2% annualized pace in the first quarter.² While this marked an improvement from late 2025, it came in slightly below forecasts, suggesting moderate but uneven growth. Labor market data remained firm, with initial jobless claims falling to 189,000, the lowest level in decades.²

3. Jobless Claims Fall as Labor Market Remains Steady

Last week, new filings for unemployment benefits declined, signaling continued stability in the labor market. Data from the U.S. Department of Labor showed initial jobless claims fell by 26,000 to 189,000 for the week ending April 25th, coming in well below expectations.³ The broader trend continues to reflect a labor environment characterized by relatively low hiring and low layoffs.

Ongoing claims, captured in continuing jobless claims, also declined to 1.785 million, suggesting workers who lose jobs are generally finding new positions without extended delays.³ The unemployment rate, previously measured at 4.3% in March, appears to have remained stable through April based on recent survey data.⁴

While global developments have contributed to higher energy and commodity prices, their effects have not yet materially altered labor conditions. This steady backdrop supports expectations that the Fed will maintain its current policy stance in the near-term as it monitors inflation and broader economic trends.

For the period ending 5/1/26.
* Small-cap stocks are represented by the Russell 2000^® Index. International stocks are represented by the MSCI EAFE. Bonds are represented by the Bloomberg US Aggregate Bond Index. Oil is represented by WTI Oil (West Texas Intermediate Oil), a benchmark for light, sweet crude oil and a primary measure for pricing oil contracts and futures in the U.S.

Sources
¹ Board of Governors of the Federal Reserve System — Federal Reserve Issues FOMC Statement, April 29, 2026 (Press Release, released 2:00 p.m. EDT)
² U.S. Bureau of Economic Analysis — (1) GDP, Advance Estimate, 1st Quarter 2026 (released April 30, 2026, 8:30 a.m. EDT); (2) Personal Income and Outlays, March 2026 (BEA 26–22, released April 30, 2026, 8:30 a.m. EDT)
³ U.S. Department of Labor, Employment and Training Administration — Unemployment Insurance Weekly Claims Report, week ending April 25, 2026 (released April 30, 2026, 8:30 a.m. EDT)
⁴ Bureau of Labor Statistics, U.S. Department of Labor — The Employment Situation, March 2026 (USDL-26-0580, released April 3, 2026)

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