Inflation Data Was Pretty, Pretty Good
CPI came in at 2.7% year-over-year, matching expectations. Core inflation edged up to 2.9%, but markets took it in stride and mortgage rates barely moved on the news. Some tariff-sensitive categories like apparel and home furnishings saw price bumps. Meanwhile, vehicle prices actually fell. The producer price index, a measure of wholesale costs, showed no change in June, against the forecast for a 0.2% increase. The same was true for the core PPI. Overall, it's another month where tariffs aren't really showing up in the inflation data.
The real win? Shelter inflation is cooling. Shelter costs—by far the stickiest part of the inflation puzzle—rose just 0.2% month-over-month. That’s a major shift, and exactly what the Fed’s been hoping for since it began hiking rates. With annual shelter inflation now down to 3.8%, pressure on renters and buyers is easing. If this trend holds, it opens the door to more rate relief—and more breathing room for homebuyers heading into the fall.
Trump used the report to initiate another call for the Fed to lower interest rates. “Consumer Prices LOW. Bring down the Fed Rate, NOW!!!” the president posted on Truth Social. He later added: “Fed should cut Rates by 3 Points. Very Low Inflation. One Trillion Dollars a year would be saved!!!”
Consumers Aren’t Slowing Down—Even With Tariffs
U.S. retail sales rose way more than expected in June, showing that consumers are still spending confidently despite inflation and the return of tariffs. Summer shopping is in full force - we're even seeing the Austin housing market heat up. Categories like clothing, electronics, restaurants, and even online shopping all posted gains.
For the Fed, this complicates things. Strong consumer demand reduces the urgency to cut rates quickly—even though shelter inflation is finally cooling. It’s a balancing act: inflation is easing, but the economy isn’t showing signs of needing stimulus just yet.
Trump vs. Powell: Part 1000
We all know that Trump absolutely HATES Powell for not cutting rates, and he's not afraid to tell Powell that on a weekly basis. But, last week Trump approached Republican congressional members with a plan to fire Powell over the Fed’s $2.5 billion headquarters renovation is being used as a possible “for cause” excuse to boot him. $2.5B is certainly a crazy number, but it's not much more than the original $1.9B and most of it (seemingly) is due to foundation repairs and ADA upgrades.
Trump (so far) has decided not to fire Powell for the renovations to preserve the status quo with the financial markets. WSJ claimed that this was because Treasury Secretary Scott Bessent persuaded him not to do it, but Trump says he came to the conclusion on his own.
Despite the denial, Trump reiterated his disdain for Powell, calling him “the Worst Federal Reserve Chairman in History” and saying firing him is still “highly unlikely—unless he has to leave.” Stay tuned for more Powell/Trump drama that will likely take place until Powell's term ends May 15, 2026.
Rate Cut Predictions
Predicting rate cuts is getting tricky ahead of the new August 1st tariff deadline. Anything can happen. Trade war flare ups continue as the US says they aren't interested in rushing negotiations to make deals before August 1st. EU is contemplating how to retaliate if August 1st tariffs are actually implemented.
Don't hold your breath for a July cut but, September is still the odds-on favorite.
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