Summary
- Inflation remains the central constraint for the second half of 2026. The economy is still growing, but higher borrowing costs, energy volatility, fiscal pressure and competition for capital are limiting how much room investors, public entities, and policymakers, have to maneuver.
- The Fed’s July decision to hold rates steady reinforced a key reality of the second half of 2026: inflation remains the primary constraint on monetary policy. Core inflation is back above 3%, unemployment is above 4%, and the possibility of higher-for-longer rates remains very much alive.
- Municipal bond demand has defined the 2026 market, but the second-half test will be credit discipline. Investors continue to favor tax-exempt income, while elevated issuance and the Post-Golden-Age Realignment make issuer-level fundamentals more important.
advisorhub.com
by Tom Kozlik, HilltopSecurities
July 31, 2026