Monthly Macro Insights: August 2026 (Rothschild & Co)

Summary

• Investment linked to artificial intelligence remains exceptionally strong, sustaining corporate profits, equity markets and business spending.p.1
• Long-term sovereign bond yields have risen sharply across most advanced economies.p.2
• The Fed left the federal funds rate unchanged at 3.50%-3.75% at its July meeting.p.3
• Chairman Kevin Warsh has largely abandoned forward guidance in favour of shorter communications focused on current economic conditions.p.3
• The growing number of dissenting votes within the Federal Open Market Committee reinforces concerns about the lack of clear communication.p.4

Key insights

1. Trade barriers, geopolitical disruptions and persistent inflation could force central banks to keep policy rates elevated for longer.p.2
2. Large fiscal deficits and heavy sovereign debt issuance are increasing the supply of bonds markets must absorb.p.2
3. Competition for capital between governments and AI-related projects may raise the equilibrium cost of capital structurally.p.2
4. Rising Japanese government bond yields could have implications for global financial stability.p.2
5. The July statement offered little indication regarding the likely future path of interest rates.p.3
6. Warsh's policy stance appears to rest on the belief that stronger productivity growth will eventually emerge from technological innovation.p.3