Weekly Commentary: Not Restrictive

2025-07-19 05:35:02 ET

In his argument for a July rate cut, Fed Governor Christopher Waller states that "tariffs are one-off increases in the price level and do not cause inflation beyond a temporary surge." Moreover, "a host of data argues that monetary policy should be close to neutral, not restrictive." "The [GDP and employment] data imply the policy rate should be around neutral, which the median of FOMC participants estimates is 3%, and not where we are-1.25 to 1.50 percentage points above 3%."

The Atlanta Fed GDPNow Forecast has Q3 growth up around 2.4%, a notable acceleration from the first half. As for the labor market, June's Unemployment Rate dipped a tenth to a historically low 4.1% (hasn't been lower since January). Data suggests labor market tightening. Weekly Jobless Claims dropped last week to a three-month low of 221,000. The most recent (May) JOLTS data surprised with a hefty (almost 400k) jump in job openings to a six-month high of 7.769 million.

July 14 - Bloomberg (Rachel Graf): "Companies rushed to tap the US leveraged-loan market for debt on Monday, leading to the market's busiest day since January. The week kicked off with 19 leveraged-loan launches, worth about $24 billion… That's the most since Jan. 21, when more than 30 firms tapped the market for $48 billion of debt."...

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