Summary
United States: One Day or Another: FOMC Still in Wait-and-See Mode
- In this week’s most closely-watched release, the FOMC elected to maintain its federal funds rate target at 4.25%–4.50%, citing continued economic resilience and still-elevated inflation. With the incoming data broadly continuing to point to a U.S. economy that is slowing but not grinding to a halt, the FOMC remains in a holding pattern as it awaits a fuller picture of how tariffs play out in the data.
- Next week: Home Sales (Mon. & Wed.), Durable Goods (Thu.), Personal Income & Spending (Fri.)
International: More Daylight, More Monetary Policy Decisions
- The days got longer this week, and equally long was the list of foreign central banks meeting to deliver monetary policy decisions. The Bank of Japan, Bank of England and Chilean central bank held rates steady, as expected, while Norway’s central bank surprised market participants with a rate cut. The Swiss National Bank and Sweden’s central bank both delivered rate cuts, and the Brazilian central bank hiked rates, in our view, for the last time this easing cycle.
- Next week: Eurozone PMIs (Mon.), Canada CPI (Tue.), Banxico Policy Rate (Thu.)
Interest Rate Watch: Outlook for Fed Policy Remains Highly Uncertain
- Although the median dot in the FOMC’s “dot plot” continues to look for 50 bps of rate cuts by the end of the year, Chair Powell suggested in his press conference after this week’s FOMC meeting that the outlook for monetary policy is highly uncertain.
Credit Market Insights: A Compression in Spreads
- Corporate bond markets have settled into a more stable rhythm in recent weeks, following a period of heightened volatility earlier this year. Credit investors are still focusing on potential risks, but the extreme high-risk sentiment has cooled. For now, spreads are continuing on their previous trend of cautious optimism.
Topic of the Week: What’s Behind the Recent Rise in Home Supply?
- Resale inventories are normalizing. The reasons? Weak demand as a result of persistently high mortgage rates, the return to office, easing of the mortgage rate lock-in effect, rising “hidden” homeownership costs and cooling labor market all appear to be behind the climb in supply.
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