The Open Bell — Ep. 029 — 31 Jul 2026

Today on The Open Bell: The US economy slowed sharply in Q2 and inflation is finally cooling, but both things are happening for the same reason, which is that oil prices fell, which is itself a consequence of the Middle East conflict, so the "good news" on prices and the "bad news" on growth aren't really two separate stories. A drone hit an American gas tanker in Egypt yesterday, the first attack of this war on a vessel at Damietta, and the port sits right next to the Suez Canal, the last functioning safe route for Gulf oil heading to Europe, so this one matters well beyond the ship itself. The Bank of England held UK interest rates at 3.75% today but three of the nine policymakers on the committee voted to raise them, which is a closer call than almost anyone expected and a real signal that another hike is on the table when they meet again in September. If today's episode helped you get your head around a genuinely complicated news day, a five-star rating helps the next listener find the show. Hosted by Alex Monroe. New episodes every weekday morning at theopenbell.co Not investment advice. For informational purposes only. --- Chapters: 00:00 Introduction 00:25 US Q2 GDP Slows to 1.5% as PCE Inflation Cools to 3.3% 03:08 Drone Strikes US LNG Vessel at Egypt's Damietta, Rattling Su 05:29 Bank of England Holds at 3.75% in Tight 6-3 Vote, Flags Hike 07:14 Closing thoughts

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Good morning. It's Friday, 34 July, 2026, and this is the Open Bell. I'm Alex Munro. The US economy just printed its weakest growth number in years. A drone hit an American gas tanker in Egypt, and Britain's central bank held rates by the narrowest margin in years. Three separate stories, but all of them come back to the same underlying question. How much longer can policymakers hold the line before something gives? Start with the number that lands on your paycheck. The US economy grew at 1.5% in the second quarter. That's the annualized rate, meaning if the whole year looked like those three months, total output would be up about 1.5%. The consensus forecast was 2.1%. The actual number was 2.1% in the first quarter. So we've gone from meeting expectations to missing them by a significant margin in one quarter, and it's the weakest reading since late 2025. Now, before you read that as a sign of imminent recession, the detail matters. The headline miss was driven largely by two things. Federal government spending fell, and businesses drew down their inventories rather than restocking. Both of those are the kind of components that economists tend to treat as temporary. Consumer spending held up, private investment was relatively firm. Exports were rising. The underlying picture isn't as bad as the top line suggests, but it's not good either, and the trend is pointing in the wrong direction. Here's where it gets genuinely complicated. The same report that showed the economy slowing also showed inflation cooling. Core PCE, that's the Federal Reserve's preferred inflation measure, which strips out food and energy to show the underlying price trend, rose just 3.3% year on year in June, its smallest monthly gain in over a year. And headline PCE, which includes everything, actually fell slightly in June. The energy retreat we covered this week, oil prices dropping roughly 20% from their peak, fed directly into that number. So the data is doing something almost contradictory. Growth is slowing, which is normally what you want to see before cutting rates, but inflation at 3.3% is still well above the Fed's 2% target, which means cutting rates right now would be a gamble. The Fed held rates steady just yesterday, and this data frankly vindicates that call. Not because the economy is fine, but because it isn't fine in two directions at once. The last time the US had sub 1.5% growth alongside above 3% core inflation was the second quarter of 2022. The Fed's response then was to accelerate rate hikes to a 40-year high, which ultimately which ultimately tipped the economy into a technical recession. Nobody wants a repeat of that sequence. The question September's meeting has to answer is whether holding steady is wisdom or delay. The uncomfortable truth buried in this report. The reason inflation is easing is almost entirely because oil prices fell. And the reason oil prices fell even briefly is because of a ceasefire moment in the Middle East conflict. That same conflict is also slowing the global economy, so the good news and the bad news are two readings of the same underlying event, just viewed from different angles. Which brings us directly to why that ceasefire optimism may have been premature. A drone struck a US owned liquefied natural gas storage vessel at Egypt's port of Damietta on July 29th. Egypt's cabinet confirmed it at around 8 in the morning UTC on July 30th, and called it the first attack on Egyptian soil since the Iran-US conflict began in February. No group has claimed responsibility, and a fire spread from the struck vessel to a second regasification ship. That's the facility that converts compressed gas back into usable form for the grid. Both ships were moved offshore. Operations at the terminal were disrupted. This matters for reasons that go beyond the immediate damage. Damietta sits on Egypt's Mediterranean coast, right at the northern end of the Suez Canal Corridor, and the Suez Corridor, along with the Sumed Pipeline that runs parallel to it, is now effectively the last safe northbound route for Saudi Arabian oil to reach European markets. The Strait of Hormuz, at the other end of the Persian Gulf, has been under sustained pressure from Iranian forces. The Bab el-Mandab Strait, at the southern end of the Red Sea, has been targeted by Houthi forces. That leaves Suez, and now someone has struck an energy vessel sitting right next to it. Iranian state television had identified Damieta as a possible retaliation target in the days before the strike. Per Euro News. US military strikes on Iran resumed after a five-night pause. Markets absorbed all of this simultaneously on July 30th, and oil prices moved higher. Egypt's port authority said other berths at Damietta were operating normally, and some energy traders noted the physical LNG supply impact was limited because the ships were safely moved. That may well be true in the short term, but the market doesn't just price what happened. It prices what this attack signals about where the conflict is willing to go next. This is the first time in this war that an attack has hit Egyptian territory. Egypt has tried to stay out of the direct line of fire. That changes today. And European gas consumers are the ones most exposed if the Suez Corridor becomes the next contested zone, because if that route comes under sustained pressure, heading into winter, household energy bills across the continent go up and they go up fast. The 2024 Houthie campaign in the Red Sea pushed LNG freight rates up more than 300% in six weeks. Suez would be worse. The Bank of England's decision yesterday fits squarely into the same set of pressures, just translated into British mortgage rates and pound signs. The Monetary Policy Committee, the 9% panel that sets UK interest rates, voted 6-3 to hold the bank rate at 3.75%. That's where rates have sat since December. The vote itself was the news. Economists pulled ahead of the decision, expected a 7-2 split in favor of holding. Instead, three members wanted to hike immediately. That's a narrower majority than expected, and it tells you the internal debate is live in a way the headline decision doesn't capture. The bank's own forecast deserve a close look. They project UK inflation peaking at 3.2% in the fourth quarter of this year, that's nearly double their 2% target, before falling back to around 1.7% by early 2028. UK GDP growth is projected at just 1.1% in the third quarter. Slow growth and inflation still well above target, the same impossible combination the Fed is dealing with, just with a British accent. Markets repriced sharply after the decision. The probability of a rate hike at September's meeting dropped to around 35% as traders concluded that slowing growth will keep the committee cautious. But the historical parallel here is striking. The last time the NPC held with a 6-3 split was November 2022. Within two meetings after that, the committee had raised rates by three-quarters of a percentage point in total. The dissenting minority had the trajectory right. They were just early. Three out of nine Bank of England policymakers wanted to raise mortgage rates today. They were outvoted, but only just. And that conversation is scheduled to resume in September. Step back and look at this week as a whole, and one thing stands out. The data everywhere is telling the same story in slightly different languages, the global economy is slowing, inflation hasn't fully retreated, and the conflict in the Middle East keeps disrupting both the energy prices that drive inflation and the growth conditions that would justify cutting rates. Every central bank is stuck in a version of the same trap. Next week, watch the July Jobs report in the US. If employment holds up, the Fed's September decision stays genuinely uncertain. If it softens, the pressure to hold gets harder to maintain. If you want today's numbers in writing, the newsletter has all of it. Free, link in the show notes. That's the open bell. I'm Alex Monroe. Have a sharp morning.