The U.S. economy grew at a 1.5 percent annualized rate in the second quarter, well short of the 2 percent that analysts had forecast and down from 2.1 percent in the first three months of the year, according to Commerce Department figures released Thursday, and three regional Federal Reserve presidents went public Friday to argue that rates should have been raised this week.

The pairing sharpens a policy problem the Fed has run without a good answer for more than five years: growth is losing steam while inflation refuses to come down. The Personal Consumption Expenditures Price Index, the central bank's preferred inflation gauge, rose 3.7 percent in the year to June, well above the 2 percent target. Consumer prices climbed 3.5 percent over the same span.

What shifted

Consumer spending, which accounts for more than two-thirds of U.S. economic activity, expanded at a 3.2 percent annual rate in the quarter after slowing to 0.5 percent earlier this year, the Commerce Department said. Americans kept buying light-duty trucks, furniture and prescription drugs. The headline slowdown came from lower government spending, investment and exports, which offset the consumer boost.

Brent crude, the global oil benchmark, traded near $90 a barrel Thursday after fresh Middle East escalations, and average U.S. gasoline prices climbed back above $4 a gallon.

The dissent goes public

Cleveland Fed President Beth Hammack, Minneapolis Fed President Neel Kashkari and Dallas Fed President Lorie Logan voted this week against holding the federal-funds rate in a range of 3.5 percent to 3.75 percent, where it has sat all year following three cuts in late 2025. On Friday, Hammack and Kashkari released statements explaining why.

"In my view, now is the time for the [Federal Open Market Committee] to act to speed the return of PCE inflation to our 2 percent objective and deliver on our commitment to price stability for the American people," Hammack said. She added that she is "not confident it will return to our objective on its own" and said constituents in the Cleveland area describe "pricing pressures as broadening rather than fading, and consumers are expressing despair over persistently higher prices."

Kashkari argued that acting sooner would be cheaper than acting later. "In my view, a potential series of small policy moves would be better than waiting and eventually concluding that even bolder actions were necessary," he said. Logan is expected to release her own statement later Friday.

Wednesday's 9-3 vote was Chairman Kevin Warsh's first meeting at the gavel, and it drew a 1,153-point drop in the Dow Jones Industrial Average and a jump in long-term Treasury yields. Warsh, who backed the hold, said the central bank would not be rushed. "We have begun a new chapter, and we understand that the five-plus years of inflation above target cannot be cured in nine weeks — or by a single month of modest price decreases," he said.

The counter

Several private-sector economists said the second-quarter figure understated underlying momentum. Michael Pearce, chief U.S. economist at Oxford Economics, said the reading underplayed the "strength" of the economy and that growth would likely return above 2 percent later this year, aided by reviving investment outside the artificial-intelligence buildout. Bradley Saunders of Capital Economics said the report "seriously undersells a healthy economy" and that households have "shrugged off" the hit from higher fuel prices. A broader political response to the dissenters' statements was not yet on the record.

Logan's statement is due later Friday. The next Federal Open Market Committee meeting is scheduled for September, and traders will be watching August payrolls and the July PCE print for evidence on whether Hammack's demand-side worry or Pearce's rebound thesis is closer to the mark.