Latest / Markets with Megan: A Quick Financial Markets Update / Fed Clarity? Powell Signals Wait-And-See Mode | S2 E054 | 06-25-25

Transcript

Fed Clarity? Powell Signals Wait-And-See Mode | S2 E054 | 06-25-25 · Markets with Megan: A Quick Financial Markets Update

• 0:00
  Megan Horneman: So we have a little bit more clarity on what the Fed's next steps may be and when they may happen.
• 0:05
  Megan Horneman: It's Wednesday, June 25th, and this is Markets with Megan.
• 0:08
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• 0:10
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• 0:11
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• 0:13
  Megan Horneman: But we wanted to come today to discuss what we've heard from the Federal Reserve Chairman, Jerome Powell, over his two-day testimony to Congress, and this is a heavily scrutinized meeting.
• 0:24
  Megan Horneman: It happens over a two-day time period and they ask questions all the way from the impact of artificial intelligence to the jobs market, to even the fiscal deficit and trying to get some idea from the Federal Reserve of what their view is going into the future.
• 0:40
  Megan Horneman: But what investors in the markets are focused on is when is he going to cut interest rates next?
• 0:46
  Megan Horneman: And we got a little bit more clarity around that Now over the past two days.
• 0:51
  Megan Horneman: Federal Reserve Chairman has been very clear that they are in a wait and see mode.
• 0:56
  Megan Horneman: While we have some tariffs in place.
• 0:58
  Megan Horneman: Right now, the biggest concern around is what will the ultimate tariffs be and what will that mean for inflation.
• 1:05
  Megan Horneman: He does believe that they are inflationary, but whether that's a one-time impact to inflation and the degree at which companies will pass this on to consumers is still very uncertain at this point.
• 1:17
  Megan Horneman: So he feels confident with where the economy is, specifically the labor market to just sit in this wait and see approach and while there's been differing views from a lot of different Fed officials, it sounds like on balance, most officials agree with him that it's okay to wait a couple months to cut interest rates.
• 1:34
  Megan Horneman: So we don't think, and we have not thought, that they would be able to cut interest rates in July.
• 1:39
  Megan Horneman: We still think that the economy is weakening.
• 1:42
  Megan Horneman: It's weakening pretty rapidly Now.
• 1:45
  Megan Horneman: While the labor market remains relatively intact.
• 1:48
  Megan Horneman: It is showing signs of weakness and we have several more employment reports before we will get that September meeting.
• 1:54
  Megan Horneman: So we still think that they'll be able to cut interest rates in September.
• 1:58
  Megan Horneman: Now the biggest unknown is the tariffs.
• 2:01
  Megan Horneman: The deadline for the tariffs and the reciprocal tariffs is July 9th.
• 2:05
  Megan Horneman: What the deals may be, what the end results may be from tariffs is still unknown and we don't know how much it's going to work its way into the economy.
• 2:13
  Megan Horneman: So they want to wait and we agree with that.
• 2:16
  Megan Horneman: The last thing they want to be doing is chasing inflation again, like they were after the pandemic.
• 2:22
  Megan Horneman: What we've seen from the markets is that the markets today are relatively muted.
• 2:25
  Megan Horneman: We've had a pretty robust rebound after what we saw over the weekend with the US bombing the nuclear facilities in Iran, so the markets are taking a breather.
• 2:34
  Megan Horneman: Today there's really not a lot to absorb, except what the Fed said.
• 2:37
  Megan Horneman: Futures market is pricing in a September rate cut and then another one in December, and we think that is likely barring any major changes to inflation.
• 2:48
  Megan Horneman: One last thing that was also announced today is that the Federal Reserve is agreeing to relaxing some of the requirements on banks.
• 2:55
  Megan Horneman: They decided to roll back those capital rules, specifically what they require on the capital requirements for banks.
• 3:06
  Megan Horneman: They're going to revise that to a range of 3.5% to 4.5% from the current 5% level.
• 3:13
  Megan Horneman: That should help with liquidity in the treasury market and could also open up some from the lending standpoint.
• 3:19
  Megan Horneman: That's all we have today.
• 3:20
  Megan Horneman: We still have some other economic data this week.
• 3:23
  Megan Horneman: Tomorrow, on Thursday, June 26, we'll get information on the durable goods, the preliminary reading of that for May, and then Friday we'll get the Fed's preferred inflation indicator, which is that PCE core for the month of May.
• 3:36
  Megan Horneman: So both of those can be market moving events.
• 3:38
  Megan Horneman: That's all we have, If you like, this podcast.
• 3:41
  Megan Horneman: We have a history of that on marketswithmeganfm.
• 3:43
  Megan Horneman: Thank you,