Jul. 30 at 4:23 PM
Can a case be made for a rate cut???
Key gauge of underlying demand in the economy — real final sales to private domestic purchasers, aka “core GDP” — slowed to +1.2% in 2Q25 (weakest pace since 4Q22) down from +1.9% in 1Q25
Core PCE inflation eased to +2.5%, down from +2.9% in 1Q25. Combined w/softening shelter & wage pressures, this signals disinflation traction — giving the Fed room to pivot
Breakevens reflect that inflation remains anchored near Fed's 2% target
But.....
Consumer spending (70% of GDP) jumped in 2Q25 to a +1.4% rate, up from the anemic +0.5% in 1Q25
Unemployment remains at historically low levels. Lower immigration & deportations reducing labour supply
$SPY up +8.47% YTD & up +31.94% from the low on Apr 7th - which contributes to wealth effect (+10% stock market = +0.3% to +0.4% in spending - higher consumer confidence would amplify to over +0.5% spending)
Typically, Fed steps in w/ cuts whenever it’s clear that the economy is bound to weaken
$SHY $TLT $GLD