👋Hi Friends,
📆This Week’s Topic
This week we will be discussing the Federal Reserve and interest rates. We talked about them a handful of weeks ago and there have been some updates I would like to discuss with you this week. Today I will be talking about the updates with the key inflation measure, how it is increasing, and other Federal Reserve updates.
💳 Cause & Effect
In June, consumer prices grew by 0.3% and we are up 2.4% from last June. This pickup in consumer prices could produce conflict between President Trump and the Federal Reserve. The Fed is in a bind right now because on one hand the market could be cooling which would allow for some decreased interest rates and less inflation. On the other hand some inflation is predicted because of Trump’s tariffs. The Fed is currently choosing to keep interest rates steady for the time being due to issues with inflation.
📊 Statistics
Trump has repeatedly demanded to cut rates significantly and some members of the board of governors have that the Fed should cut rates but do not feel that cutting the rates as much as Trump would be good. One of the main goals of the Federal Reserve is to get a 2% growth of inflation annually. Although, in recent years it has been a lot higher than that. For example, in 2023 it was 4%. Although, with consumer spending on the rise that could mean some essential economic growth.
🔚 Outcome
Jerome H. Powell, the Fed chair stated that the Federal Reserve’s next meeting in September the Feds will base the decision on the recent economic statistics and focusing on the labor market and recent inflation. This is too have the best possible outcome for the economy. This decision will come about in September and they will decide whether to keep the interest rates stable (which is what they have been doing) or to cut the rates.
⛱ Consumer Effect
As I mentioned last time, keeping interest rates steady is good and bad for consumers. On one hand it means any savings you have an a savings account will keep accruing the same high interest rate. On the other hand it will have higher housing and loan payments means that it would be significantly more difficult to afford a house. With this higher interest you could be paying 10s of thousands of dollars more if you don’t have a locked rate mortgage. Although, if rates were cut we would be facing different problems. Cut rates means that consumers would not have as much interest accruing in savings account as well as other negative effects from the economy.
🏢Business Effect
For businesses like banks, it means that they will have more money coming in from higher interest rate loans, but have less money from the higher interest they will be paying for savings accounts. This could end up being difficult to both businesses and consumers.
⏳ Final Summary
In summary, the Federal Reserve made a decision to keep interest rates steady. This means that the cost of borrowing will not get cheaper and interest rates for savings accounts will not go up. Also, consumer spending has been going which is good for the economy but might hint there is a increase in inflation ahead. Consumer prices have also been going up from 2.4% of last June and 0.3% this month. This just means there will be more inflation coming up soon.
🙏Thank You & Important Information
Anyway, thank you so much for reading this edition of Friday Finance. If you enjoyed this article or have anything to say feel free to like or leave a comment below. Have a great week and I will see you next week.
Jacob Gans
Friday Finance