Weekly economic commentary: European Central Bank pauses

Summary

United States: Housing market enters an early winter

• This week’s data highlighted the mounting challenges facing home buyers, sellers and builders. Both existing and new home sales came in below market expectations in June. High rates and economic uncertainty also continued to exert pressure on durable goods orders, which set the stage for a weaker equipment spending print in Q2.

• Next week: GDP (Wed.), Employment (Fri.), ISM Manufacturing (Fri.)

International: European Central Bank pauses, and so do Europe's economies

• The European Central Bank (ECB) held its Deposit Rate steady at 2.00% this week. In the U.K., July PMI data showed modest improvement in the Eurozone. Meanwhile, data reinforced expectations for a 25 bps Bank of England rate cut in August. Finally, Turkey surprised markets with a larger-than-expected 300 bps cut to 43.00%.

• Next week: Australia CPI (Wed.), Bank of Canada Policy Rate (Wed.), Bank of Japan Policy Rate (Thu.)

Interest rate watch: How to finance President Trump's agenda?

• We do not expect any major policy shifts at the upcoming quarterly refunding announcement from the U.S. Treasury. In our view, Treasury's current coupon auction schedule is well-suited to meet its financing needs for the next few quarters, and any unexpected swings in the government's financing needs can be met by an expansion or contraction in the supply of Treasury bills.

Credit market insights: Lending hesitation remains but financial conditions ease

• The July Beige Book revealed that credit markets remain subdued, with most Federal Reserve districts reporting flat or modest loan growth. Lending has been affected, as borrowers delay activity in response to elevated risk. Despite these headwinds, financial conditions have eased from their post-tariff lows, suggesting some resilience in the broader economy.

Topic of the week: If your friends slashed rates, wouldn't you?

• Slowing economic growth and softer inflation reports have led many major G10 central banks to ease monetary policy. The Federal Reserve isn't following the same pace, partly due to relatively firmer upside pressures amid more resilient growth and uncertainty over the inflationary impulse of higher tariffs.

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