Staff: Washington’s economy holding, inflation elevated; oil and trade risks loom

Dr. Wright presented the council with the preliminary economic forecast and revenue experience, saying the outlook is "a little bit more optimistic" than the June forecast but that risks remain, notably the Iran war and elevated energy prices.

On inflation and labor, Dr. Wright said wage measures came in at 4.4% overall (3.7% excluding energy) and that employment growth in Washington has been weak, with the state down year‑on‑year but showing some recent month‑to‑month pick‑up. He noted higher 10‑year Treasury yields (near 5%) and a strong equity market (S&P 500 up substantially), both of which influence borrowing costs and household wealth. "Based on the information that's come out just in the last week and especially this morning with the CPI report, we now expect that there'll probably be a rate increase next week... it's likely it'll be 0.25 point rate increase," Dr. Wright said when discussing Federal Reserve expectations.

Dr. Wright highlighted state‑level indicators: Washington real GDP grew about 4.4% in Q1 driven by the information sector, exports are up nearly 20% year‑to‑date (led by transportation equipment), and the Case‑Shiller index shows Seattle prices down roughly 1.9% year‑over‑year. He summarized the baseline as modest growth — roughly 2% real GDP growth in coming years — and said staff does not expect a near‑term recession under baseline assumptions, though scenarios tied to higher oil prices or sustained trade disruption would reduce growth.

Dr. Wright said revenue collections are running slightly above expectations and that staff will return with a revenue forecast update on the 25th. Council members asked clarifying questions on how volatile oil prices and interest rates are incorporated into the forecast and revenue review; Dr. Wright said oil assumptions come from futures markets and that the revenue review will use the most recent futures pricing and updated interest‑rate inputs.