Mid-Year Economic Forecast: A Strong Economy, a Worrying State Trend

The national economy is strong. Washington's trajectory is not. That tension ran through the full hour when WaFd Bank President and CEO Brent Beardall took the stage at our Mid-Year Economic Forecast on Thursday, June 18, for his eighth annual read on the numbers. To a sold-out room, he moved from oil shocks to the Federal Reserve to the state budget to banking and housing, then traded questions with Chamber President and CEO Joe Fain. We filmed the sharpest moments and tucked them into this recap, so you can hear the case in his own words.

A Resilient National Picture

Beardall opened on a deliberately reassuring note. First-quarter GDP came in at 1.5%, with projections above 2% for the rest of 2026, defying a year of tariff and trade worry. The buildout of AI and computing power alone is adding close to a point and a half to GDP, and the year-to-date return on the S&P 500 stood at 10.91%, a broad rally led by energy, information technology, industrials, and materials.

Then he turned to the Strait of Hormuz. Crude shipments through the strait had fallen from 125 ships to a handful, the kind of headline that sounds alarming until you follow the supply chain. Watch him explain why the standoff is, on balance, a net positive for the United States:

The throughline: the uncertainty keeps the Fed on hold, but the American economy absorbs the shock far better than the countries on the receiving end of that oil.

The Fed Holds, and Inflation Lingers

Much of his attention went to the Federal Reserve, and much of his praise too. The Fed engineered a soft landing, bringing inflation down from a 7% peak without triggering a recession or major job losses, with unemployment holding near 4.25%. New chair Chairman Warsh then dropped the Fed's bias toward rate cuts, a move that rattled markets the day before the lunch and that Beardall applauded.

"We need to reinforce the political independence of the Federal Reserve." — Brent Beardall

His discipline point was the sharpest of the segment. The Fed's stated goal is 2% inflation, a mark it has not hit in a decade, which left him puzzled that cuts were ever on the table:

Washington's Trend "Is Not Our Friend"

The mood shifted when Beardall turned to the state. Citing Microsoft's Brad Smith, he said Washington has become a high-tax state nearly across the board, ranking among the worst nationally on sales, business, capital gains, and estate taxes.

"We've decided in our infinite wisdom to be a high tax state almost across the board." — Brent Beardall

The figure that unsettled him most was not a tax rate. It was the spending line: a state operating budget that has grown from $33 billion to $78 billion since 2014, a 48% increase even after adjusting for inflation and population. He walked the room through why that math worries him:

He pointed to early indicators of capital flight: residential real estate values that now lead the nation in decline, and a million-square-foot class A office tower in downtown Seattle that recently traded at roughly $280 per square foot against a $1,000 replacement cost. The most personal signal came from his own boardroom.

"Three of our board members have now chosen to redomicile. That bothers me a great deal." — Brent Beardall

Asked by Fain what city and state leaders should do, Beardall reframed the whole debate as a question of growth rather than division.

"We shouldn't be saying how do we grow our portion of the pie, but rather how do we grow the pie. It's not a zero sum game." — Brent Beardall

Banking, Housing, and What's Next

There was good news in his own backyard. WaFd posted a strong quarter, with active loans up 12% quarter over quarter, earnings per share up 26%, and a 10.8% return on equity. He flagged the rapid growth of non-depository financial institution lending, or NDFI, as a risk the bank is deliberately sitting out.

Housing drew the most pointed question of the Q&A. With mortgage rates likely to stay in the mid-6% range and institutional buyers competing with families, Fain asked what could possibly ease affordability. Beardall was blunt about what will not, and what will:

Fain closed by asking for predictions specific enough to hold him to a year from now. Beardall obliged, with a flattening yield curve, a federal funds rate near 4.25%, and one forecast the room happily endorsed:

We will hold him to all of it. The conversation continues next month, when the chief economist for the Federal Reserve Bank of San Francisco joins us for the July 9 Chamber Lunch. Register here!

Watch the full video from our 2026 Mid-Year Economic Forecast Here!