The global economy is easing. The United States is not. So far in 2025, central banks around the world have cut interest rates 64 times. That is the most since the pandemic panic of 2020. The European Central Bank has already lowered rates four times. The Bank of Canada, the Bank of England, and the Swiss National Bank have each cut twice. New Zealand and Australia have trimmed three and two times, respectively. The trend is clear. The world is loosening. The Fed is not.
The Federal Reserve is holding its benchmark rate steady at 4.25 to 4.5%. It has not moved since December. The market is betting on a cut by September. The CME FedWatch Tool puts the odds at 75%. But the Fed is not blinking. The reason is tariffs. The Trump administration’s 10% reciprocal tariff regime is still in its 90-day pause window. That ends July 9. If the full tariffs snap into place, the Fed will likely stay frozen through the fall. Inflation risk is too high. The Fed is waiting to see how much damage the tariffs do before it moves.
The damage is already showing. Consumer confidence dropped 5.4 points in June, falling to 93.0. That is the lowest reading since early 2023. The share of Americans who say jobs are plentiful fell to 29.2%. That is the weakest labor sentiment in four years. The Conference Board’s Expectations Index dropped to 69.0. Anything below 80 usually signals a recession within 12 months.
Debt is piling up. Total household debt hit 18.2 trillion dollars in Q1 2025. That is up 167 billion from the previous quarter. Credit card balances fell by 29 billion. Auto loan balances dropped by 13 billion. That is the first back-to-back quarterly decline in auto debt since 2011. Mortgage balances rose by 199 billion. Student loans jumped 16 billion. Delinquencies are rising across the board. The share of debt in some stage of delinquency is now 4.3%.
The market is not listening. The S&P 500 is up 11% year to date. Tech is leading. AI stocks are ripping. Traders are pricing in rate cuts that have not happened. They are ignoring the tariff clock. They are ignoring the debt load. They are ignoring the consumer.
The Fed is boxed in. If it cuts too soon, it risks fueling inflation. If it waits too long, it risks a hard landing. The tariffs are the wild card. If Trump lets them expire, the Fed may move in September. If not, the pause continues. The next FOMC meeting is July 30. The data between now and then will decide the path.
Sources
https://x.com/jdogzeenft/status/1939003329218257181
https://www.ecb.europa.eu/press/economic-bulletin/html/eb202504.en.html
https://www.newyorkfed.org/newsevents/news/research/2025/20250513
https://www.conference-board.org/topics/consumer-confidence/press/CCI-Jun-2025
https://www.aa.com.tr/en/americas/us-consumer-confidence-falls-in-june-despite-forecasts/3611803
Thankfully, Wall St reflect Main St., right gang? We can all go back to sleep now. The ‘experts’ are in control