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Economic Commentary

July 22, 2024 – Economic Commentary

July 28, 2024

As the Federal Reserve steps gingerly towards its next interest rate decision at the FOMC meetings scheduled for July 30-31, the data released this week will be critical. Markets do not expect any interest rate cut in July but have begun to anticipate a 25 bps reduction at the September FOMC meeting. The timing of the Fed's actions — assuming that the Fed believes, like the European Central Bank before it, that a quarter-point cut is warranted by the slower pace of economic growth and inflation— is suddenly quite challenging. Unlike the ECB, the Fed must realistically consider the optics of a September rate cut six weeks out from a fraught Presidential election. The Trump campaign has already warned against such a move, and while the Fed remains staunchly apolitical, there is a deep self-appreciation that their actions can be influential. Failing to cut rates in September would push the next chance out to November 6-7, immediately following the formal balloting on November 5, also an unappealing thought for a Federal Reserve that wishes to avoid this kind of controversy. This week's data on inflation, economic growth, and labor markets (initial claims for unemployment) may provide a window for the Fed to take action sooner rather than later, guided by the political realities of the next few months.

The midsummer doldrums of the last month before school starts may not happen this year. It's more likely to be delayed-monsoon, early-hurricane weather on a number of levels.

Data to Watch:

  1. S&PGlobal US Purchasing Managers Index for July (Preliminary), released Tuesday, July 23
  2. First Estimate of US Q2 GDP growth, released Thursday, July 25
  3. US Personal Consumption Expenditures Price Index for June, released Friday, July 26 4. US Personal Spending and Income for June, released Friday, July 26

Suggested Reading:

  1. American Borrowers Are on Shakier Ground. These Charts Show Why.
  2. What’s to blame for the CrowdStrike mess? Our drive for efficiency.
  3. China Shows Few Signs of Tilting Economy Toward Consumers in New Plan
  4. Motels Are Having a Moment

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