Weekly economic and financial commentary: FOMC remains in wait and see mode

Summary

United States: Dog days of summer

• While it was a light week on the economic data front, there was still plenty of news to digest with tariffs coming back to center stage. Elevated uncertainty is beginning to creep into economic activity, leading us to revise down our estimate for Q2 real GDP growth.

• Next week: CPI (Tue.), Retail Sales (Thu.), Housing Starts (Fri.)

International: Down under central banks take rate cut time-outs

• The Reserve Bank of Australia surprised markets by holding its policy rate steady at 3.85% this week, though its accompanying statement and comments suggest an August rate cut remains on course. The Reserve Bank of New Zealand also held rates steady at 3.25% and signaled further easing should be forthcoming. U.K. May GDP was soft, but Canadian June jobs data showed some resilience, while June inflation surprised to the upside in both Mexico and Brazil.

• Next week: China GDP (Tue.), Canada CPI (Tue.), United Kingdom CPI (Wed.)

Interest rate watch: FOMC remains in wait & see mode, at least for now

• The minutes of the June 17-18 FOMC meeting indicate that the Committee likely will not cut rates at its next meeting at the end of this month. However, we think conditions will warrant a 25 bps rate cut in September.

Topic of the week: You get a tariff! You get a tariff!

• In a flurry of tariff announcements this week, President Trump extended the pause on reciprocal rates, upped rates for some countries and brought new sector-level tariffs back into the fold. We summarize these developments and estimate the effect on the U.S. effective tariff rate.

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