Federal Reserve Chair Jerome Powell and his colleagues will step into the central bank’s board room on Tuesday to deliberate on interest rates at a time of immense political pressure, evolving trade policy, and economic cross-currents.
In a rare occurrence, policymakers will convene in the same week that the government issues reports on gross domestic product, employment and the Fed’s preferred price metrics. Fed officials meet Tuesday and Wednesday, and are widely expected to keep rates unchanged again.
Forecasters anticipate the heavy dose of data will show economic activity rebounded in the second quarter, largely due to a sharp narrowing of the trade deficit, while job growth moderated in July. The third marquee report may show underlying inflation picked up slightly in June from a month earlier.
While the government’s advance estimate of GDP for the quarter is projected to show an annualized 2.4% increase — after the economy shrank 0.5% in January-March — Wednesday’s report will probably reveal only modest household demand and business investment.
The median forecast in a Bloomberg survey calls for a 1.5% gain in consumer spending to mark the weakest back-to-back quarters since the onset of the pandemic in early 2020. A shaky housing market also weighed on second-quarter activity.
At the end of the week, the July jobs report is forecast to show companies are becoming more deliberate in their hiring. Employment likely moderated after a June increase that was boosted by a jump in education payrolls, while the unemployment rate is seen ticking up to 4.2%.
Private payrolls are projected to rise by 100,000 after the smallest advance in eight months. Through the first half of the year, the pace of hiring by companies has eased compared with the 2024 average. The breadth of job growth has been relatively narrow as well. Separate figures out Tuesday are forecast to show job openings declined in June.
A few Fed officials have started to raise concerns about what they see as a fragile job market, including two who’ve said they see merit in considering a rate cut now. Pressure is also mounting from outside the boardroom. President Donald Trump has been vocal about his desire to see Powell & Co. lower borrowing costs for consumers and businesses.
The president has frequently chastised Powell for moving too slowly, while at the same time taking aim at his stewardship over construction cost overruns related to renovation of the Fed’s Eccles Building headquarters in Washington.
Powell and other central bankers have stressed the need for patience as the Trump administration’s tariffs risk a re-acceleration of inflation. So far this year, since a variety of US duties on imports were imposed, price pressures have been modest.
The government’s personal income and spending report for June, due on Friday, is projected to show the Fed’s preferred core inflation gauge accelerated slightly from a month earlier, indicating tariffs are only gradually being passed through to consumers.
Further north, the Bank of Canada is also set to hold, keeping borrowing costs steady at 2.75% for a third consecutive meeting amid trade uncertainty, sticky core inflation, and an economy that seems to be handling tariffs better than many economists expected. Officials will release a monetary policy report, but it’s not yet known whether they’ll return to point forecasts or release multiple scenarios, as they did in April amid volatile US trade policy.
Industry-based GDP data for May and a flash estimate for June are expected to point to a contraction in the second quarter. Prime Minister Mark Carney is pushing to get a trade deal done with Trump by Aug. 1, but he and the country’s provincial leaders have downplayed expectations, saying they’re focused above all on getting a good agreement.
On a global level, Trump’s Friday deadline also takes center stage, with several countries — including the European Union, South Korea and Switzerland — still hoping to clinch trade agreements.
European Commission chief Ursula von der Leyen will meet the US president in Scotland on Sunday afternoon in an attempt to secure a pact. EU officials have repeatedly cautioned that a deal ultimately rests with Trump, making the final outcome difficult to predict.
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