07/31/2025
Yesterday, the market showed mixed performance after the much-anticipated decision by the Federal Reserve to keep interest rates unchanged caught market attention. The Fed's move was in line with expectations, but two governors who supported a 25-basis-point rate cut voted against it, highlighting the growing divergence within the central bank. Fed Chair Jerome Powell reiterated that caution is needed amid ongoing trade uncertainties and inflation risks, and emphasized that policy remains "moderately restrictive" and appropriate for the current situation. However, Powell did not explicitly hint at a possible rate cut in September, prompting the market to reassess the likelihood of near-term policy easing.
Although GDP growth was strong in the second quarter—with an annualized growth rate reaching 3%, well above the consensus forecast of 2.3%—underlying data suggest that there are cracks beneath the surface of the economy. Final sales to private domestic purchasers (a better measure of domestic demand) grew by only 1.2%, the lowest level since 2022. Coupled with the continued weakness in consumer spending and business investment, this has strengthened the belief that the economy is gradually losing steam.
