Overview 

The economy regained momentum to start 2026, but new pressures are emerging beneath the surface. Growth rebounded in the first quarter, labor markets remain stable, and financial markets continue to show resilience. At the same time, inflation moved higher in March, the Federal Reserve signaled caution on future rate cuts, and global uncertainty is adding pressure to the outlook.

Interest Rates & the Federal Reserve

The Fed held rates steady between 3.5% - 3.75% at its April 29 meeting, but the decision was anything but routine. The 8-4 dissent vote was the most divided the Fed has been since 1992.

Markets increasingly expect interest rates to stay on hold through the rest of the year, so Southern California will have to wait before home purchase conditions improve.  

Growth, Jobs & Markets

Economic growth improved in the first quarter, with GDP rising at a 2.0% annualized pace, up from 0.5% growth in Q4 2025. While the rebound is encouraging, economists continue to monitor inflation pressures and broader global risks that could weigh on momentum later this year.

Job growth has moderated but remains healthy overall, and unemployment continues to stay low nationally and across Southern California.

After a brief period of market volatility in early April tied to global tensions, stock markets rebounded quickly and are once again trading near record highs. Market resilience continues to be one of the defining themes of 2026.

Inflation

Inflation moved higher in March, driven largely by rising energy prices and the continued impacts of tariffs. While inflation has eased from peak levels seen in recent years, it remains above the Fed’s comfort zone.

Consumers & Housing

Consumers remain cautious about the broader economic outlook, though spending activity has remained more resilient than many economists expected.  

Housing markets across much of the country are beginning to cool as higher borrowing costs continue to impact affordability. However, Southern California home prices remain modestly above last year’s levels, though momentum has slowed.

Bottom Line

Growth is real, but so are the headwinds. Inflation is back above comfort levels, the Fed and monetary policy remains data dependent, and global risk is adding a new layer of uncertainty. Southern California is holding up well, but this isn’t the time to expect smooth sailing.

If you have questions about your finances, financial goals, or next steps our team is always here as a trusted resource for our members.

Explore our financial wellness resources or connect with our team to learn more.

 

Nate Phan

Nate is Assistant Vice President of Finance at California Coast Credit Union, where he specializes in asset-liability management and balance sheet strategy. With nearly a decade of capital markets experience, he works at the intersection of macroeconomic trends and institutional financial planning–translating shifts in interest rates, monetary policy, and credit market conditions into actionable strategy for the credit union’s ALCO process. His work centers on translating complex financial dynamics into actionable insights that support sound, member-focused decision-making.