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GDP surges by 2.8%, giving hope for rate cuts in September

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2 years ago

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With GDP increasing 2.8% annually, this signals a strong economy.  (iStock )

As a welcome surprise, the gross domestic product (GDP) increased 2.8% annually in the second quarter, an advance estimate released by the U.S. Bureau of Economic Analysis found. Generally, a GDP between 2% and 3% signifies a strong U.S. economy, so this is good news for the overall economic outlook. In the first quarter, GDP increased by just 1.4%.

As the GDP increases and the economy evens out, it’s more likely that the Federal Reserve will cut interest rates. This sudden jump in economic growth is signaling that rate cuts may be on the horizon.

“GDP exceeded expectations in the second quarter, restoring faith that the economy is easing into a sustainable level of growth,” America’s Credit Unions Deputy Chief Economist Curt Long said in a statement.”Recent statements from Federal Reserve officials confirm that a rate cut is squarely in view. However, such action is not needed to ward off a recession but is rather a response to the moderation in inflation.”

The increase in real GDP can largely be attributed to an increase in consumer spending, as well as private inventory investments and nonresidential fixed investments.

Consumer spending increased across both the service and goods industries. Health care was one of the higher spend categories in the service industry, along with housing and recreation services. As for goods, motor vehicles and parts contributed most to the GDP growth. Furnishings, household equipment, gasoline and other energy goods also contributed.

“Both an increase in consumer spending on durable goods and business spending on inventories accounted for a substantial part of last quarter’s expansion,” said Mike Fratantoni, Mortgage Bankers Association (MBA) senior vice president and chief economist.

“Weaker net exports reflect a global economy that continues to operate in a lower gear as well as a stronger dollar,” Frantantoni said. “While top line growth is above the pace needed to keep the unemployment rate from rising further, the components do suggest the economy may slow from here.” 

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INFLATION IS WHY MANY AMERICANS PLAN TO DELAY RETIREMENT: SURVEY

Fed could cut interest rates in September

Consumers have been waiting for federal funds rate cuts that could lower interest rates on products such as mortgages, student loans and other loans. At the beginning of the year, consumers were told there would be an estimated six rate cuts by the end of the year, but that has grown increasingly unlikely.

Thanks to a higher-than-expected GDP report, economists believe September will be the first time the Federal Reserve cuts rates. These experts estimate there’s a 99.8% chance rates will be cut in September.

There’s also a high chance there will be a few more rate cuts by the end of the year. Experts say there’s a 97.4% chance of at least two more cuts by the end of December.

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83% OF AMERICANS CONSIDER HOMEOWNERSHIP AN ESSENTIAL LIFE MILESTONE: SURVEY

Recession fears still linger for many Americans

Despite signs that the economy is heading in the right direction, there are still lingering fears that a recession is here or at least on the horizon. About three in five people believe the U.S. is currently in a recession, according to research from Affirm.

The survey asked 2,000 Americans why they lacked confidence in the current economy. Unsurprisingly, inflation and rising costs were the most common reason (68%) consumers believe the U.S. is in a recession. Another 50% think the U.S. is in the midst of a recession because of family members and friends constantly complaining about money problems.

Most respondents believe the recession started about 15 months ago, and don’t expect it to end anytime soon. Consumers believe the economy won’t officially start to recover until at least July 2025. Again, inflation is largely to blame for why these respondents believe there’s currently a recession.

About 68% of Americans said inflation is negatively affecting their future financial plans, making it difficult for them to save for bigger purchases.

“With confidence in the U.S. economy at a low point, consumers are urgently seeking ways to feel in control of their finances,” said Vishal Kapoor, Affirm senior vice president of product. “Amidst these levels of uncertainty and doubt, we believe that the antidote to the current ‘vibecession’ is greater choice and transparency in how people manage their finances.”

In an attempt to stay in control of their finances, 54% of Americans have or would consider buy now, pay later options. Consumers surveyed noted that BNPL helps them better manage their day-to-day budget.

Personal loans with low interest rates are also strong options for consumers who need financing with low monthly payments. When it comes to personal loan shopping, Credible can do the heavy lifting for you. With the click of a button, you can view multiple lenders, rates, and terms in one spot.

HOUSING AFFORDABILITY TOP CONCERN FOR YOUNGER VOTERS THIS PRESIDENTIAL ELECTION: SURVEY

Have a finance-related question, but don’t know who to ask? Email The Credible Money Expert at [email protected] and your question might be answered by Credible in our Money Expert column.

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Finance

Private Credit Expansion and Regulatory Oversight in 2026 Capital Markets

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6 days ago

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August 9, 2026

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The global private credit market has solidified its role as a fundamental pillar of enterprise finance, expanding rapidly across middle-market lending, asset-backed finance, and infrastructure financing. As non-bank financial institutions capture a larger share of corporate debt origination, global regulatory bodies are increasing oversight to evaluate market transparency and systemic risk interconnections.

Growth Drivers in Direct Lending
Direct lending platforms have continued to attract substantial institutional allocations from pension funds, sovereign wealth entities, and insurance companies seeking attractive risk-adjusted yields. Private debt funds offer corporate borrowers customized financing structures, faster execution timelines, and confidentiality compared to syndicated loan markets.

In 2026, private credit managers are increasingly financing larger corporate transactions, providing multi-billion-dollar credit facilities for buyout deals and corporate restructurings. The flexibility of private debt contracts—featuring unitranche pricing and tailored covenant packages—has made direct lending the preferred capital source for middle-market enterprise sponsors.

Regulatory Scrutiny and Systemic Risk Assessment
The rapid growth of non-bank intermediation has drawn heightened scrutiny from financial regulators in North America and Europe. Because private debt agreements are negotiated privately without public exchange disclosures, central banks are evaluating potential vulnerabilities related to asset valuation consistency and fund liquidity profiles.

Regulatory agencies are introducing guidelines aimed at improving reporting standards for private investment vehicles managing institutional assets. Key focus areas include monitoring leverage ratios within private credit funds and evaluating indirect credit exposures between commercial banking institutions and private debt funds.

Navigating Elevated Refinancing Costs
With benchmark interest rates remaining elevated, private debt borrowers face higher debt service obligations on floating-rate credit facilities. Financial advisory firms report an increase in proactive liability management strategies, including payment-in-kind (PIK) interest options, equity infusions from sponsors, and covenant modifications.

Private credit managers with deep operational capabilities are actively working alongside portfolio companies to optimize working capital and maintain cash flow coverage ratios during periods of higher borrowing costs.

Key Financial Takeaways
1. Mainstream Asset Class: Private credit has expanded beyond niche alternative asset status into a core corporate finance solution.
2. Enhanced Transparency Standards: Regulatory frameworks are evolving toward greater disclosure requirements for private debt managers.
3. Proactive Risk Management: Lenders and sponsors must prioritize debt sustainability and active portfolio monitoring amid high benchmark rates.

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Finance

Venture Capital and Startup Valuations in 2026: Focus on Unit Economics and Sustainable Growth

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1 week ago

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August 5, 2026

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The global venture capital (VC) ecosystem is operating under a disciplined investment framework in 2026. Following years of valuation adjustments and shifting liquidity environments, venture capital firms and private equity investors are prioritizing proven unit economics, positive cash flow pathways, and capital efficiency over rapid, unconstrained user acquisition.

The Shift Toward Disciplined Startup Valuations
Early-stage and growth-stage startup valuations have stabilized at sustainable historical averages. Venture capital partners are conducting rigorous due diligence processes before deploying capital, scrutinizing gross margins, customer acquisition costs (CAC), net revenue retention (NRR), and lifetime value (LTV) metrics.

While total capital deployed remains robust, seed and Series A funding rounds are taking longer to finalize. Founders are expected to demonstrate clear product-market fit and defensible intellectual property rather than relying on top-line revenue projections unsupported by strong underlying economics.

M&A Activity and Liquidity Solutions
The market for venture-backed exits is seeing renewed momentum through strategic mergers and acquisitions (M&A) and secondary market liquidity facilities. Established corporate enterprises are acquiring high-performing technology startups to integrate proprietary artificial intelligence models and specialized software solutions into their product ecosystems.

Simultaneously, secondary market transactions have become an essential liquidity mechanism for early employees and institutional investors. Specialized secondary funds are purchasing pre-IPO shares at discounted valuations, providing liquidity opportunities while companies remain private for longer durations.

Sector Allocation: Deep Tech, Clean Energy, and Enterprise Automation
Venture capital investment is heavily concentrated in deep technology and capital-intensive engineering sectors. High-growth investment themes include:
– Next-Generation Semiconductors: Hardware startups designing specialized AI processors and energy-efficient microchip architectures.
– Clean Technology: Battery chemistry innovations, carbon capture solutions, and grid-scale energy storage startups.
– Enterprise Process Automation: Software platforms that automate complex workflows in healthcare, financial services, and industrial logistics.

Key Insights for Entrepreneurs and Investors
1. Prioritize Capital Efficiency: Startups focused on achieving operational profitability receive higher valuation premiums from institutional investors.
2. Strategic Exit Planning: Corporate M&A is serving as a primary exit route for venture-backed startups navigating prolonged IPO windows.
3. Focus on High-Moat Technologies: Deep tech and proprietary software architectures are securing the majority of growth-stage capital allocations.

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Finance

The Evolution of Digital Payments: Cross-Border Settlement and Central Bank Digital Currencies in 2026

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1 week ago

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August 5, 2026

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The infrastructure supporting global commerce is undergoing a major technological upgrade as real-time digital payment rails, cross-border settlement solutions, and Central Bank Digital Currency (CBDC) pilot programs achieve widespread commercial adoption. Financial institutions and fintech developers are reimagining payment processing to eliminate friction, lower transaction fees, and accelerate settlement speed.

Transforming Cross-Border Settlement Infrastructure
For decades, international corporate payments relied on legacy correspondent banking networks characterized by multi-day settlement delays, opaque fee structures, and high foreign exchange markups. In 2026, modern cross-border payment networks are enabling near-instantaneous settlement for international trade transactions.

Financial technology platforms are leveraging distributed ledger technology and real-time gross settlement (RTGS) interconnections to settle transactions in seconds. International trade participants benefit from reduced working capital requirements and minimized foreign exchange volatility risks during cross-border transfers.

Commercial Expansion of Central Bank Digital Currencies
Central banks representing major global economies are advancing CBDC initiatives from research phases into active commercial deployment. Wholesale CBDCs—designed specifically for interbank settlement and financial institution clearing—are demonstrating substantial efficiency gains in domestic and international transactions.

At the retail level, several nations have introduced public digital currency options alongside existing commercial banking networks. These sovereign digital payment channels aim to expand financial inclusion, lower consumer transaction fees, and improve the efficiency of government-to-citizen financial disbursements.

Open Banking and Embedded Finance Ecosystems
Alongside settlement infrastructure upgrades, open banking regulations and embedded finance frameworks are transforming merchant-consumer interactions. Commercial businesses across retail, travel, and business-to-business (B2B) services are integrating seamless payment APIs directly into their customer software interfaces.

Through open banking frameworks, consumers can initiate secure bank-to-bank payments without relying on traditional credit card networks, significantly reducing merchant processing fees. Integrated Buy-Now-Pay-Later (BNPL) options and point-of-sale credit facilities continue to expand, driving higher conversion rates for digital commerce platforms.

Strategic Financial Takeaways
1. Treasury Optimization: Corporate treasurers should leverage instant cross-border payment platforms to minimize liquidity buffers and foreign exchange exposure.
2. CBDC Integration: Financial institutions must prepare internal core banking systems to interface with emerging wholesale CBDC payment rails.
3. Merchant Fee Reduction: Enterprise merchants can lower payment processing overhead by adopting account-to-account (A2A) open banking checkout solutions.

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