The US economy began to show more and more indicators of the negative impact it produces Donald Trump’s commercial policy. However, That had a paradoxical effect on the market in recent daysgiven that He made the expectations of a federal reserve feats jump (Fed) in September. It is in this context that some analysts They project a stanflation scenario againproduct of the deceleration in the activity and an inflation level still far from the Fed goal.
From Personal Investor Portfolio (PPI) They commented that “the weak ‘Job Report’ on Friday, which evidenced a strong slowdown in the creation of employment and negative reviews, triggered the expectations of a federal reserve rates in September.”
The probability that the market was assigned to at least one decline in that meeting jumped from 38% on Thursday to 90% after the report was known. This Tuesday that expectation barely fell: It is around 89.4%, with only 10.6% of the market actors surveyed waiting for the North American Central Bank to maintain the rate.
“It should be remembered that, after the last Fed meeting of July 30, in which the rate of 4.25%-4.50%and Powell reiterated a ‘Data-Dependent’ approach (dependent on the data), the probabilities of a cut in September had fallen below 50%, making it clear that a cut was not even the base scenario for the market“PPI said.
The crossroads for the Fed
The Outlier consultancy also echoed that data, although they stated: “Now, We cannot rule out more volatility in this regard because different surveys indicate that the impact of prices tariffs are beginning to materializewhich removes pressure on the Fed to lower the rates and proves Powell, and because Trump will continue to contribute noise. “
Meanwhile, in Eco Go they stated that the last meeting of the Fed “Anachronics was quickly” product that in the United States Lighter deceleration signals appearan internal consumption that begins to falter and a labor market cooling at an accelerated pace. “
And they added that “forward this is a process that the Federal Reserve will not be able to ignore: in the ‘Trade-Off’ (cost-benefit ratio) between unemployment and inflation, The Fed will have to pay more attention to the first component“. The last employment report found that The creation of non -agricultural employment in the US was just 73,000 in Julyquite far from the 110,000 that anticipated the consensus of the analysts.
“Worse, May and June data had a strong downward review since it went from 125,000 and 147,000 to only 19,000 and 14,000, respectively, respectively, what marks that employment was not as solid as it seemed – 240,000 less jobs were created, What brought Trump’s fury, who asked to remove the person in charge of labor statistics– “, explained from Cohen financial allies.
While, Inflation is quite above the year of 2% annual that the Fed was set. The Consumer Price Index (CPI) was 2.7% in July, while the Personal Consumer Price Index (PCE), the favorite by the monetary authority, marked a 2.6% rise that month.
Danger of stagflation?
In Cohen They affirmed that “The stagflation returned to the debate” in the United States after the indicators of last week. “The data suggests that the American activity lost impulse. To the employment data of July is added the poor result of the manufacturing PMI, which in July He fell to 48 points and marked the fifth consecutive month of contraction in the sector, being the weakest since October last year“They argued
Similarly, the PMI of services measured by the Supply Management Institute (ISM) showed a level of 50.1 in July, below June 50.8 and well under the projections, which had anticipated about 51.5 points.
That was added that The indicator of new orders for services dropped to 50.3 from 51.3 in Junedragged by a contraction in export orders for the fourth time in five months. However, Inflation remained persistent, with the sector price index rising to 69.9 points, its highest level since 2022.
In any case, they stated that there were also data that compensated, “with a constant improvement in consumer confidence, after the collapse of the first quarter, and with indicators of the services sector that mark a good dynamism.” In fact, this Tuesday it was also known that The PMI of services that M&P measures rose to 55.1 points in July, after June 52.9 and above the estimated.
In addition, they added that “the first estimates of the ‘Nowcast’ of Atlanta’s Fed point to a growth of 2.1% quarterly in the second four -month period of 2025, driven by consumption and investment.” Meanwhile, this day was known that That same agency predicted a growth of 2.5% for the third quarter.
Source: Ambito
