#interest-rates

#interest-rates

The European Central Bank left interest rates unchanged Thursday with inflation back under control and the economy weathering Trump's tariff onslaught better than expected. The bank's rate-setting council left its benchmark deposit rate unchanged at 2% at a meeting at its skyscraper headquarters in Frankfurt. The focus in Europe has shifted to the fiscal crisis in France and any possible role for the ECB in containing potential market turmoil that could erupt from the country's out-of-control deficit and political logjam.

As expected, inflation ticked slightly higher during August with rising housing, food and energy costs leading the way. Core inflation however remained stable, ensuring a rate cut in September is now a forgone conclusion. The Federal reserve having been in wait and see mode since December 2024 has been given the green light today to cut rates. Inflation has not seen large upside surprises from tariff turmoil and with recent revisions to jobs data showing almost 1 million fewer jobs than previously thought,

The move is a chilling escalation of Trump's weaponization of the DOJ against perceived political opponents. It's also part of an obvious and long-standing effort to gain control of the Fed. Like the politicization of law enforcement, seizing power over the central bank is a power grab straight out of the authoritarian playbook, and one with predictable, ugly outcomes for America's economy and democracy.

Wall Street is holding steady Thursday as the countdown ticks to an update on the U.S. job market coming Friday that could clear the way for the cuts to interest rates that investors love. The S&P 500 was virtually unchanged in morning trading. The Dow Jones Industrial Average was down 52 points, or 0.1%, as of 10:10 a.m. Eastern time, and the Nasdaq composite was flat.

Fed Chair Jerome Powell hinted at potential rate cuts in September, which could lead to an increase in home renovation spending rather than a surge in home sales due to persistently high mortgage rates. The focus shifts to Home Equity Lines of Credit as they are influenced more directly by short-term rates and could see reduced costs, allowing homeowners to tap their equity for long-delayed renovations and improvements.

One very positive item for investors when earnings season rolls around every quarter is that the big money center and investment banks are always among the first to report. This year was no different, as all the major financials were released early and, for the most part, all delivered outstanding numbers. As with all sectors, the tariffs are weighing on sentiment and affecting companies' ability to provide forward guidance that they feel comfortable with.

Gen Z and Millennials have largely come of age in a period of high housing costs and volatile mortgage rates, yet they are more likely than older generations to believe conditions will hold steady or even improve. That optimism could be a powerful driver of housing demand in the years ahead, as younger buyers remain motivated to enter the market despite ongoing affordability challenges.

Under the modeled scenario, a drop of 0.25 percentage points left borrowers $2,424 underwater after three years. A drop of 0.5 points resulted in break-even status after 3.08 years. A decline of 75 basis points allowed borrowers to break even in just under three years, while a drop of 100 basis points delivered break-even status in 20 months and $4,764 in net savings.

Trump put millions of dollars behind his bond strategy in February including between $500,000 and $1 million each into bonds issued by companies such as Home Depot, T-Mobile, and United Healthcare. Another bet of between $250,000 and $500,000 went into debt issued by Meta, based on a calculation of 690 transactions reported to the Office of Government Ethics since January and published Tuesday.

34% of UK homes are seeing a reduction in price, the highest for this period since 2012, indicating a two-speed property market.

"Overall, consumers are no longer bracing for the worst-case scenario for the economy feared in April, when President Trump announced his stunning set of worldwide tariffs. However, consumers continue to expect both inflation and unemployment to deter their spending decisions."