Fed Decision & Many More Economic Data Points -3

15:17 30-Jul-25

Powell's press conference has just concluded and was probably satisfying to nobody.  In defending today's decision, Powell noted continued balance in the labor market are reflective of tandem decreases in both supply and demand, which seems indicative of downside risk, as I've already noted.  Everything else was staunchly politically correct including characterizing Trump's visit to the FOMC as "very nice".  He also reiterated that housing has broader problems that are not within the Fed's mandate.  However there was no getting around the point that the Fed does NOT consider debt servicing costs when making policy, and that doing so is not practiced by any central bank associated with a mature, reliable economy.  Thus, any change to that practice and central bank independence would be likely to do dramatic harm.

This comes as we also learn about 25% tariffs on India and escalation with China seeming likely.  Most recent, and ridiculous IMO, is executive assertion that Brazil poses "an unusual and extraordinary threat" to America and raising the tariff rate there from 10% to 50%.  I also think these developments were timed to use the Fed as cover.

Whatever the reason, American equity indexes have turned negative as anticipated below.

The FOMC has decided to hold rates steady, as expected by more or less everyone.  As also broadly expected Waller and Bowman dissented in favor a quarter point cut.  Otherwise, there is not much change in the statement and the changes are there actually lessen the chances of a cut in September.  Markets haven't really reacted yet, but I think it will be hard for them to take this positively.  I am likely to follow up on the press conference which begins at 2:30.  Keep in mind that Powell would have another chance to signal policy action at Jackson Hole on August 23rd.

The ADP report for July came in at +104K with 4.4% annual salary growth, with the first number more than doubling expectations.  This is a welcome contrast to yesterday morning's JOLTS numbers which confirmed the employment market was still frozen in June.  As usual, the market ignores these numbers even though I consider them superior to Friday's employment report.  For markets, though, this undercuts any expectation of the Fed signaling a September rate cut this afternoon.

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