Trump to Tour Fed, Ramping Up Pressure Campaign on Powell; ECB Rate Decision in Focus
This afternoon, President Trump and his advisers are set to tour the construction site where the Federal Reserve is renovating its headquarters. The president has expressed disapproval of the $2.5 billion worth of renovation works, in line with his criticism of the bank’s interest-rate policy under Fed Chair Jerome Powell. Additionally, purchasing managers’ indexes covering manufacturing and services will bring further insights as July unfolds. On the international front, the European Central Bank is anticipated to maintain rates in its Thursday policy decision. Meanwhile, the Reserve Bank of Australia is addressing critiques regarding its interest rate policy, which may impact unemployment rates.
Trump to Tour Fed, Ramping Up Pressure Campaign on Powell
The White House announced that President Trump will visit the Federal Reserve on Thursday afternoon. This visit aligns with a previously scheduled tour for several White House advisers to the construction site of the Fed’s headquarters renovation, as clarified by a White House official.
Visits by a President to the central bank are rare, yet they coincide with a unique pressure campaign led by Trump and his advisers in recent weeks, demanding that Fed Chair Jerome Powell and his colleagues consider lowering interest rates.
The focus on the renovation of two historic buildings set to serve as the Fed’s headquarters aligns with Trump’s broader frustration over interest rates. Expectations are that the Fed will maintain steady interest rates at its upcoming policy meeting next week.
RBA Pushes Back on Criticism That It Has Been Too Slow to Cut Rates
The rise in unemployment in June was not unexpected for the Reserve Bank of Australia, Reserve Bank of Australia Gov. Michele Bullock stated in a speech to financial market participants. The jobless rate rose to 4.3% in June, the highest since November 2021, a change forecasted by the central bank in May.
These remarks emerge as pressure mounts on the RBA to cut interest rates, especially as inflation has stabilized within the 2% to 3% target band, economic growth remains sluggish, and unemployment continues to climb.
RBA Gov. Michele Bullock emphasized central bank independence as a key principle and extended her support to the Federal Reserve, indicating uncertainty over Trump’s motives in attacking Jerome Powell. “The Fed is doing what it’s supposed to—focusing on the economy and employment without getting drawn into debates,” she remarked. “Central bank independence is crucial, and what’s occurring in the United States challenges that.”
U.S. Economy and Housing Market
Home prices have soared to a new peak in June, while the spring sales season dwindled, indicating that a complete housing-market recovery is unlikely before 2025. Prospective buyers showed hesitance with home sales in June falling to a nine-month low as record-high home prices, paired with mortgage rates above 6.5%, rendered home purchases unaffordable for many.
Trump’s New Trade Standard and Financial Markets
President Trump’s pursuit of a new global trade standard is solidifying as negotiations between the U.S. and European Union officials move toward a prospective 15% tariff deal. This could follow a similar agreement with Japan, signaling a strategic shift in trade dynamics.
Individual investors are once again engaging fervently with certain undervalued stocks, using social media to rally defense against critics and short sellers, notably driving up the shares of Kohl’s and Opendoor.
Judicial and Regulatory Developments
Tom Hayes, who became synonymous with the Libor scandal, succeeded in his appeal to clear his name, overturning one of the most prominent cases arising from the global financial crisis.
Firing Powell Wouldn’t Slash Interest Costs
Recently, markets were concerned that President Trump might attempt to dismiss Fed Chair Jerome Powell, a possibility he later renounced. This provided economists with insights into how Treasury yields might behave if such a dismissal were to take place. Evidence suggests yields for terms up to three years would decrease, while those beyond seven years would increase, according to an analysis by Deutsche Bank. “Ultimately, based on projected yield curve shifts from last week, we expect minimal savings over the next several years if Chair Powell were dismissed,” writes Matthew Luzzetti and his collaborators.
Global Economic Climate
Despite high levels of uncertainty regarding future trade and international relations, major economies in Europe and Asia have shown resilience. Nonetheless, export orders have softened. Medium-maturity euro corporate bonds present a more enticing option than their short-dated and long-dated counterparts under current conditions, according to Societe Generale’s Juan Valencia.
In conclusion, while home prices remain at record highs, housing inflation—which also encompasses renters and long-term homeowners—has continued to decrease. This trend may counterbalance rising goods prices resulting from tariffs. Meanwhile, consumer sentiment in the eurozone has slightly improved in the context of global economic uncertainties, though German consumer confidence continues to dip amidst escalating economic unpredictability.
