The U.S. economy rebounded with a 2% growth rate in the first quarter of 2026. The primary drivers were strong business investment in artificial intelligence and sustained federal spending, which together offset higher energy costs linked to ongoing geopolitical conflicts.
Federal Reserve Chair Jerome Powell said the economy has shown remarkable resilience, noting AI investments have mitigated the impact of rising energy prices. The Fed has kept interest rates steady in the 3.5-3.75% range, reflecting confidence in the outlook.
Despite global tensions including the Iran conflict and the war in Ukraine, the U.S. has avoided direct combat involvement. The data clashes sharply with prediction markets, which had priced a 100% chance of GDP growth below 1%. Observers are now watching for GDP revisions and further guidance from Powell and Commerce official Nicole R. Maynard.