AI, Energy Disruptions & Dangers on Both Sides of Fed's Dual Mandate

• Inflation is expected to return to 2% by the end of the year, with the Fed watching closely.
• The job market is resilient, but layoffs in tech and financial services are picking up, potentially leading to higher unemployment and Fed rate cuts in the back half of 2026.
• AI is viewed as additive to productivity over time, with limited near-term job displacement for white-collar workers.
• The Iran conflict's economic impact is expected to be limited and short-term, with modest pass-through to core inflation and GDP.
• The US economy is seen as a dynamic enterprise with robust R&D and infrastructure, making it an attractive destination for capital.

Larry Werther, Chief US Economist at Daiwa Capital Markets America, discusses the US economic outlook, including inflation, the job market, and geopolitical risks. He is optimistic about inflation returning to 2% and sees limited long-term impact from the Iran conflict. He expects Fed rate cuts in late 2026 due to potential unemployment rate increases.