Fed Chair Jerome Powell is not expected to signal a rate cut at this week’s meeting.
Julia Coronado, President and Founder of Macropolicy Perspectives, said, “Powell will continue his ‘wait-and-see’ policy this week. He will leave the door open for a September interest rate decision, but we don’t expect any significant moves at this week’s meeting.”
Coronado said the Fed won’t make any changes to interest rates at its upcoming meeting, but Powell will deliver key market guidance at his press conference. “There are some signs of softening in the economy and a gradual increase in inflation,” he said. “The Fed will want to monitor this data more closely. They will have two more months of data before the September meeting.”
The program also assessed the impact of a 15% global tariff. Coronado noted that such tariffs would impose a significant financial burden on US companies and consumers. “According to our estimates, core personal consumption expenditures inflation, which the Fed tracks, could exceed 3% by the end of the year,” he said. “Half of this increase will be passed on to consumers, and the other half will be passed on to corporate profit margins.”
Coronado noted that the US economy collects more than $350 billion in tariffs annually, adding that this burden will be directly reflected in prices, and consumers will face higher prices in the next few months. He added that the strongest impact of the tariffs is expected to be seen in August’s data, which could complicate the FOMC meeting in September.
Addressing the impact of tariffs and high prices on households, Coronado said, “While nominal wage growth is slowing, prices of goods and services are rising. This is suppressing consumer spending. Furthermore, due to uncertainty, people are turning to savings.”
Coronado noted that consumer spending decreased by more than half in the first half compared to last year, meaning a significant drop in company revenues, and stated that the current economic environment is challenging for companies.
He stated that the new tax cuts proposed by President Trump would mostly benefit high-income individuals and companies, while their impact on average-income consumers would be limited until 2026.
*This is not investment advice.
