Barclays_US_Outlook_The_ladder_starts_to_clatter

Please see analyst certifications and important disclosures beginning on page 10.US OutlookThe ladder starts to clatterThis week was dominated by questions about Fedindependence following the president's firing of GovernorCook, with her participation in the September now hinging onthe courts. Meanwhile, with the latest data pointing to afirmer underlying trajectory of activity, we nudge up our Q3GDP outlook.• Data suggest that domestic spending has been carrying more momentum in recent monthsthan previously thought, with upward revisions to Q2 estimates of private domestic finalpurchases coming alongside firmed July readings for consumer spending and business fixedinvestment. We have taken some signal, nudging up our official Q3 GDP forecast by 0.5pp, to1.5% q/q saar.• July's PCE price inflation estimates were close to expectations, with the headline softening to0.2% m/m (2.6% y/y) and the core firming just a touch to 0.27% m/m (2.9% y/y) amid anunwinding of prior downward pressures on financial services. We retain our forecast that coreCPI will accelerate to 0.4% m/m for the next few prints, with core PCE lagging slightly.• Although questions about Fed independence have intensified following this week's move bythe president to fire Governor Cook, markets have shrugged off the news as they await theoutcome of court challenges. Pending August payrolls, the bar for not cutting 25bp inSeptember looks high and unlikely to be affected by Cook's legal outcome, or by theconfirmation status of Miran.That's great, it starts with an earthquakeThis was another eventful week, with data developments overshadowed by the president'sattempt to fire Fed Governor Cook. The move raises legal questions about whether themortgage fraud allegations are sufficient legal "cause" to warrant a firing, and larger questionsabout whether statutes provide the Fed with enough protection to ensure independentmonetary policy. With Cook now challenging her firing in the courts, the outcome will provideimportant information about the likely course of policy and bond pricing. For its part, the Fedhas insulated itself by not directly challenging the president's decision, instead pledging toabide by court decisions on Cook's case. Markets seem to be waiting for court challenges to playout.Spending data look firmer, with tech investment feeling pretty psychedSetting aside the firing for now, the latest dataflow continues to suggest a firmer trajectory ofprivate domestic final spending into July, building upon earlier signals from the retail salesestimates.The second GDP estimates for Q2 suggest a less subdued underlying pace of activity thanpreviously thought. The 0.3pp upward revision to the headline estimate, to 3.3% q/q saarFICC ResearchEconomics29 August 2025Marc Giannoni+1 212 526 9373marc.giannoni@barclays.comBCI, USJonathan Millar+1 212 526 4876jonathan.millar@barclays.comBCI, USPooja Sriram+1 212 526 0713pooja.sriram@barclays.comBCI, USColin Johanson+1 212 526 8536colin.johanso