Recent actions and statements from the Federal Reserve (Fed) have created confusion among investors, as the economic situation in the country becomes increasingly uncertain. This article discusses various aspects of the US economy and the Fed's influence on the future.
The Fed's Path to 2025
Interest rates remained unchanged, indicating a divided perception of the US economy. On one side, promising figures are presented, yet there are signs of economic vulnerability. Investments in artificial intelligence and growing household wealth overshadow concerns regarding the impacts of trade wars. In this context, Fed Chair Jerome Powell chose not to make any commitments for September, awaiting new data over the next two months.
Employment Situation
Upcoming data will reveal the actual state of affairs, but Neil Dutta, head of economic research at Renaissance Macro Research, argues that unemployment rates do not adequately reflect labor market conditions. A number of workers have developed less optimistic expectations about wage increases, and many industries are failing to create new jobs. Fed member Waller noted these details in a recent interview.
Decline in Consumer Spending
Data from the Bank of America Institute indicates a three-month decline in spending on hotels, flights, and dining — the first since 2008. Lower-income households have decreased credit expenditures for the first time in over a year amid rising mandatory costs such as insurance and rent. Bank of America Institute President Liz Everett Krisberg mentions that consumer demand is weakening but not freezing.
Currently, it is expected that cryptocurrencies will decline during the Fed's two-month observation period, and a significant Fed rate cut this year seems unlikely. This implies a continuation of tight monetary policies with predictable outcomes in the markets.
