Fed holds rates amid Iran oil shock; three dissents for hike; mixed economic signals; June CPI drops; weak July jobs; July CPI as expected; consumer sentiment 50.6; new dovish argument; import/export prices; jobless claims 'no hire, no fire'
Key Questions
Why is the Fed holding interest rates steady?
The Fed is holding rates amid mixed signals like 3.8% April CPI, strong jobless claims data, and resilience in PMI (53.6). Economists unanimously expect a hold, though traders see a 36% chance of a hike at the July meeting.
What is driving recent gas price spikes?
National gas prices reached $4.11 with Southern California hitting $5.68, up for 11 straight days due to the Iran oil shock. Oil prices above $100 have added inflation pressure.
What do recent economic indicators show?
Housing starts rose 19% in June while pending home sales fell 5.4%; the Philly Fed Services Index jumped to +7.4. Jobless claims dropped sharply, signaling labor market strength.
What is the market outlook for rate hikes?
Markets price a 62% chance of a September hike and 35.8% for July, with 30-year yields at 5%. TD Securities sees rates on hold through 2026 but with rising hike risk.
How is consumer sentiment trending?
UMich survey shows major purchase confidence rebounded in June despite all-time low overall sentiment. This divergence reflects uneven economic pressures from inflation and rates.
Fed holds rates at 3.50%-3.75% with three dissents favoring a hike; markets see 65% chance September hike. Oil above $100, tariffs back, bond yields at 19-year high. June CPI fell month-over-month but still 3.5% y/y. July jobs weak (-23k). July CPI as expected, weakens case for hike. Real wages fell 0.2%. Retail sales declined 0.6% in July. Consumer sentiment dropped to 50.6 in August. AAF notes core PCE stuck at ~3%. Housing strain: home sales flat, rates 6.69%, first-time buyers 29%. New dovish argument from BMO's Guatieri says Fed may not need to tighten further. New: July import prices down 0.4% (fuel-driven) but nonfuel up 0.4%; export prices up 8.2% y/y. New: Jobless claims at 209K but 'no hire, no fire' labor market – low firing, even lower hiring.