As expected, the FOMC held rates steady at the conclusion of their two-day meeting on June 18. We got a lot of the usual “wait and see” and the “hard data looks good” talking points. However, the markets were most interested in the updated Summary of Economic Projections. Fed members are diverging in their future rate projections with 10 of the 19 policymakers expecting at least two rate cuts in 2025. The number of participants who expect no rate cuts this year rose from four to seven since the March update. Unemployment forecasts rose to 4.5% by year-end. Inflation forecasts for year-end followed suit - increasing to 3% from 2.7%. Two Fed members publicly expressed their interest in cutting rates as soon as July if the data maintains its present trajectory. President Trump and Commerce Secretary Howard Lutnick have both spoken publicly against Powell and asked him to lower rates.
President Trump’s Big, Beautiful Bill is making its way through the Senate with expected passage before July 4. However, obstacles remain in the form of a SALT (state and local tax) deduction limit, cuts to Medicaid and funding sources for the bills’ provisions. The House will have to approve or make changes to the bill before it goes to the president for his signature.
The ongoing battle between Israel and Iran escalated this last week after President Trump launched “bunker buster” bombs against Iran. The effort was meant to destroy Iran’s nuclear facilities and capabilities by proxy. Currently, the two countries are engaged in a temporary cease fire to alleviate any further civilian harm while both sides attempt to find middle ground.
KEY INDICATORS THIS WEEK
Housing – The Case-Schiller Housing Index showed a 2.7% year-over-year increase in home prices, the slowest pace since 2009. The small increase was attributed to affordability constraints in the form of interest rates and home prices.
Consumer Confidence – Unexpectedly fell by 5.4 points to 93 from June and future expectations for the next six months fell by 4.6 points over tariff concerns.
Next Week – Slow week for the 4th of July. We will get all the jobs reports, however. I’ll be reporting on those and more in the Market Overview and Data Report on July 7.