Market Update: The Federal Reserve and Trump’s new executive order.
The Federal Reserve
Recent strong data, including retail sales, consumer inflation, and solid labor data, are all pushing the Federal Reserve (FED) to reaffirm its holding of high interest rates for longer. Even the FED’s Kugler has also proven to stand on this side, while the FED’s Daly suggested going with two rate cuts this year.
In fact, the FED’s Kugler estimates June PCE inflation is 2.5% versus the 2% target, with core at 2.8%, both higher than in May, which is set to release on July 31, 2025.
The projection now stands with holding the interest rate in August, and the initial rate cut would be in September, with 50.8%, followed by 41.2% priced in for the December rate cut.
Regardless, even if Trump was clear that he’s unlikely to fire Powell, he also signed the new executive order on Thursday regards to “new types of non-careers for federal Reserves”. This was created to advance the administration’s policies that align with the president’s agenda.
However, this also raises concerns over the neutrality, like the traditional one, since this role is more likely to risk politicizing the federal workforce and loyalty to a political side. This also means that President Donald Trump will hold more power through this role. Despite this role playing a small part in the unemployment rate, it is significant when it comes to power or a move to lower the interest rate.
Trump is set to open the $9 trillion US retirement market to crypto investments. This refers to the investment options for American workers, allowing them to allocate retirement savings to higher-risk, potentially higher-return assets.
Extra info: Trade with the EU and Canada is still under discussion, albeit they both know that the trade agreement won’t be anywhere near their expected desires.
So what do all of these tell you?
The market still showed a mixed picture, depending on which side held more power. If the market is swayed by Trump’s power, they will price in more upward gold prices, and vice versa for Powell’s power.
