Weekly Economic Update: July 1st, 2019
• The yield on the two-year Treasury note was unchanged last week as most traders were waiting for the G-20 meetings to start. The two-year Treasury note finished the week yielding 1.75%—75 basis points less than the current fed funds rate of 2.50%.
• On Sunday, the U.S. and China agreed to hold off on applying additional tariffs to their products in an effort to resume trade talks. Any substantial success in trade talks could help reverse some of the recent declines in interest rates.
• Slow growth in inflation is one of the main reasons the Fed will most likely lower rates in late July. Inflation continues to undershoot the Fed’s target and inflation expectations are falling, undercutting the Fed’s credibility to bring inflation up to its 2 percent target.
• The sturdy increase in consumer spending last month has taken some pressure off the Fed to cut rates later this month, but odds are the Fed will follow through with its first reduction in more than a decade.