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Will There Be a Recession in 2025?

June 5, 2025 by Marco Santarelli

Will There Be a Recession in 2025?

The question on everyone's mind, from Wall Street to Main Street, is this: Will there be a recession in 2025? As things stand in late May 2025, the honest answer, based on the data and expert opinions I've been following, leans towards a likely but not guaranteed economic slowdown. We've seen some tough times before, and the current mix of rising costs, trade worries, and shaky confidence reminds me of those periods. While some experts are optimistic about our resilience, several flashing warning lights suggest we need to be cautious about the coming year.

Will There Be a Recession in 2025?

What Exactly Is a Recession Anyway?

Before diving deeper, let's clarify what we're talking about. A recession isn't just a bad day for the stock market. It's a more serious and widespread decline in economic activity that usually lasts for more than a few months. The big signs economists look for are:

  • Two Quarters of Negative Growth: This means the total value of goods and services our country produces (GDP) shrinks for six months straight.
  • Rising Joblessness: More people are losing their jobs and filing for unemployment.
  • Less Spending: People are buying fewer things, and businesses are selling less.
  • Trouble in the Financial World: Stock markets might be volatile, it could be harder for businesses and people to borrow money, and we might see problems with investments.

These things don't happen out of nowhere. Recessions can be caused by all sorts of issues, like when governments make the wrong financial moves, when there's a big crisis in the banking system, or even when something unexpected rocks the global economy. Right now, it feels like we've got a few of these potential triggers bubbling beneath the surface.

The Warning Signs I'm Watching Closely

As I look at the current economic picture (around late May 2025), several indicators make me feel uneasy about what 2025 might hold:

Policy Roadblocks and Trade Tangles

One of the biggest clouds hanging over us is the uncertainty around government policies, especially when it comes to trade. The idea of new tariffs, like the ones being talked about – a possible 10% across the board and even higher on goods from places like China, India, and the European Union – honestly scares me. Experts at UCLA Anderson say this could be like a huge tax increase, taking a big chunk out of our economy. It could make things more expensive for companies to make products, mess up the flow of goods we rely on, and ultimately mean people have less money to spend. Sectors like stores and farming could really take a hit, according to Forbes.

Even though some of the earlier worries about trade with China have cooled down a bit (J.P. Morgan Research thought the chance of a recession because of that dropped from 60% to 40%), these tariffs still feel like a heavy weight dragging on our potential for growth. J.P. Morgan thinks our economy might only grow at a snail's pace of 0.25% in the second half of 2025 because of all this.

The Inflation Puzzle and Interest Rate Tightrope

Remember when prices for everything shot up? Well, while inflation has come down from its peak in 2023 (when the Consumer Price Index hit 9.1%), it's still stubbornly high, sitting above 4.2% in the first three months of 2025. The Federal Reserve wants to see that number closer to 2%, and this persistent inflation, especially if these new tariffs make things even pricier, could lead to a really nasty situation called stagflation – where prices keep going up but the economy isn't growing. That's a tough spot to be in.

To fight inflation, the Federal Reserve has been raising interest rates. Right now, the main interest rate is at 4.34%. What worries me is that something called the yield curve has been inverted since June 2022. Basically, it means that the returns on short-term government bonds are higher than on long-term ones. This is a big deal because historically, when this happens for a long time (and this has been the longest inversion since 1955!), it's been a really reliable sign – like 94% accurate, according to Forbes – that a recession is on the way within the next 18 months or so. The Fed has paused raising rates for now, and they're in a tough position – they need to cool down inflation without slamming the brakes on the whole economy. It's a delicate balancing act, as U.S. News points out.

Slowing Down: GDP Growth Trends

When we look at how the economy has actually been performing, the numbers aren't exactly roaring. In the first quarter of 2025, the economy is projected to have grown by only about 1.1% per year. That's below what experts consider our long-term potential of around 2.2%. What's also concerning is that the growth we did see wasn't being strongly driven by people spending money – that only added a little bit (0.4%), with government spending contributing slightly more (0.5%), according to Forbes. And as I mentioned before, J.P. Morgan is predicting a really weak 0.25% growth rate for the second half of 2025. That kind of slowdown makes the economy much more vulnerable to falling into a full-blown recession.

Job Market Jitters

While the unemployment rate of 4.2% still seems relatively low, I'm starting to see some cracks in the labor market. The number of people filing new jobless claims has been creeping up, averaging around 285,000 per week recently, compared to about 220,000 in mid-2024. Also, something that often happens before a broader slowdown is that companies start cutting back on temporary workers, and we've seen temporary employment drop by over 5% annually for the past nine months, according to Forbes.

Adding to this worry is a plan by the Department of Government Efficiency (DOGE) to potentially cut 10-15% of the government workforce. UCLA Anderson suggests this could mean up to a million people losing their jobs. That kind of public sector job loss could definitely send shockwaves through the economy.

Global Economic Headwinds

We don't live in a bubble, and what's happening around the world can definitely affect us. The International Monetary Fund (IMF) has lowered its forecasts for global growth multiple times in the last year. In China, which is a huge market for us and a major source of our imports (about 15%), their manufacturing sector has been shrinking for four straight quarters, according to Forbes. If the global economy slows down, it's likely to pull our economy down with it.

Then there are potential financial crises brewing elsewhere. For example, the fact that office buildings have high vacancy rates (over 19%) and their values have dropped significantly (25-40%) is concerning. On top of that, a massive amount – $1.2 trillion – of commercial mortgages needs to be refinanced in the next couple of years, as Forbes notes. If these property owners can't refinance or if their properties lose more value, it could create big problems in the financial system.

Household Finances Under Strain

How are regular people doing? Well, the Consumer Confidence Index is below its long-term average, and retail sales (excluding cars and gas) have actually gone down in three of the last five months, according to Forbes. This suggests people are feeling less secure and are cutting back on spending.

What's really alarming is that the amount of money people are spending to pay off their debts, compared to their income, is at its highest level since 2007, right before the last big financial crisis, according to economist Larry Summers. When people are already stretched thin with debt payments, they have less room to handle unexpected expenses or a job loss, making them more vulnerable during an economic downturn.

Risks Lurking in the Financial System

Looking at the financial markets, some things remind me of past bubbles. The high valuations of some stocks, especially in areas like AI and cryptocurrencies, feel a bit like the dot-com boom. Also, the difference in returns between corporate bonds that are considered safe and those that are riskier (the corporate bond spread) is very low, which might mean investors aren't properly accounting for potential risks. And house prices are still near record highs in many areas, according to UCLA Anderson.

The Federal Reserve has also pointed out that private credit markets could pose risks to the financial system. These are basically loans made by non-bank lenders, and they aren't always as closely regulated as traditional banks. If the economy weakens, some of these loans could go bad, potentially causing wider problems.

What the Experts Are Saying

It's always good to look at what the people who study this stuff for a living are predicting. And honestly, the range of opinions on whether we'll see a recession in 2025 is pretty wide:

The Worriers' Camp

Some really well-respected economists are sounding the alarm:

  • Nouriel Roubini thinks there's an 80% chance of a recession hitting by the end of 2025, pointing to all the different risks we're facing (Forbes).
  • Larry Summers is also worried about high household debt and the potential for government policy missteps (Forbes).
  • Torsten Slok from Apollo has been particularly pessimistic, putting the odds of a recession in 2025 as high as 90% (via an X post).
  • Even surveys of business leaders are showing increased concern. A CNBC survey of Fed watchers in March 2025 found that the probability of a recession had gone up to 36% from 23%, with tariffs being seen as the biggest threat.
  • Interestingly, people are even betting on a recession happening. Platforms like Polymarket and Kalshi in April 2025 showed the odds of a recession at a pretty high 63-70% (via X posts).
  • And a CNBC survey of corporate CFOs in March 2025 found that most of them expect a recession in the second half of 2025 and described their outlook as “pessimistic.”

The Optimists' Corner

On the other hand, some economists are more hopeful:

  • David Mericle at Goldman Sachs is actually predicting a solid 2.5% GDP growth rate, saying that recession fears have lessened and the job market is still strong (Money.com).
  • Joe Davis from Vanguard also expects decent growth (2.1%) and doesn't see a recession as the most likely outcome (Money.com).
  • Paul F. Gruenwald at S&P Global forecasts 2% GDP growth, even with the policy risks out there (Money.com).
  • Mark Zandi from Moody's Analytics believes the economy is on a firm footing and that some of the unusual patterns in the job market don't necessarily mean a recession is coming (Money.com).
  • A survey of economists by SIFMA (Securities Industry and Financial Markets Association) predicted 1.9% GDP growth, with almost half of them seeing the chance of a recession as being very low (15% or less).

Somewhere in the Middle

Some experts have a more balanced view:

  • J.P. Morgan Private Bank estimates the probability of a recession at around 20%, which is higher than usual, but they don't think the current economic cycle will end in 2025.
  • A Bankrate survey in April 2025 found that the odds of a recession by March 2026 were 36%, up from 26% at the end of 2024.

What's Been Happening Lately?

Looking at the most recent data from around April 2025, the picture remains unclear but with a tilt towards increased worry:

  • While the number of people initially filing for unemployment benefits is still low (which is a good sign of job market strength), the fact that these numbers have been creeping up and that temporary employment is falling is still a concern (via an X post).
  • As I mentioned, the betting markets (Polymarket and Kalshi) saw a significant jump in recession odds from around 39% in March to 63-70% by April (via X posts).
  • And the pessimism among corporate financial officers seems to be growing, with a large majority (95%) saying that government policies are impacting their business decisions (CNBC).

What We Need to Keep an Eye On

Whether or not we actually slide into a recession in 2025 will depend on how several key factors play out:

  • The Tariffs: How big will these tariffs be, and how quickly will they be put in place? This will have a big impact on how much things cost and how much people can afford to buy.
  • Inflation: Will inflation finally start to come down towards the Fed's target, or will it stay high or even go up again, possibly forcing the Fed to raise interest rates further?
  • The Job Market: How will the planned government layoffs affect the overall job market? Will we see more widespread job losses in other sectors? What impact could potential mass deportations have on the workforce and the economy?
  • The Global Economy: Will the slowdown in major economies like China worsen? Could this further dampen demand for U.S. goods and services?
  • Government Spending and Taxes: What will be the long-term effects of the current administration's tax cuts and spending plans on our national debt and overall economic confidence?

The Bottom Line: Uncertainty Ahead

So, will there be a recession in 2025? Based on the information I've looked at, the probability feels significant, though it's definitely not a done deal. The range of expert opinions, from a relatively low 36% chance to a very high 90%, highlights the uncertainty. However, the recent trends in market sentiment, with betting platforms showing increased recession odds and corporate leaders becoming more pessimistic, suggest a growing concern.

The potential impact of new tariffs and planned government layoffs adds to these worries, especially when combined with slowing economic growth, persistent inflation, and challenges in the global economy. While some experts point to the economy's underlying strength, particularly in the labor market, the risks seem substantial. For me, it feels like we're navigating some choppy waters, and it's crucial for both policymakers and individuals to stay alert and prepared for potential economic headwinds in 2025.

Read More:

  • Do Mortgage Rates Go Down During an Economic Recession?
  • What Happens to House Prices in a Recession?
  • Goldman Sachs Significantly Raises Recession Probability by 35%
  • Will the Housing Market Crash Due to Looming Recession in 2025?
  • Will There Be a Real Estate Recession in 2025: A Forecast
  • Are We in a Recession or Inflation: Forecast for 2025

Filed Under: Economy Tagged With: Economy, Recession

Market Reactions: How Investors Should Prepare for Interest Rate Cut

June 3, 2025 by Marco Santarelli

What to Expect from the Fed's First Rate Cut in 4 Years: Predictions

When investors hear talk about potential rate cuts from the Federal Reserve, they should pay attention—just like you would when storm clouds gather. Market reactions to interest rate changes often shape how assets perform and can determine the momentum of an investment portfolio. Understanding the implications of these decisions and preparing thoughtfully is critical for investors looking to maintain and grow their wealth.

How Investors Should Prepare for Potential Interest Rate Cuts?

Key Takeaways

  • Interest Rates Matter: Rate cuts can stimulate economic growth but may also signal concerns about economic stability.
  • Sector Sensitivity: Some sectors like utilities and real estate tend to gain from lower rates, while financials might face challenges.
  • Historical Context: Analyzing previous market responses helps inform investor strategies in anticipation of new rate cuts.
  • Diversification is Key: Protecting your portfolio from volatility is best achieved through diversification across sectors and asset types.

The Role of the Federal Reserve

The Federal Reserve (Fed) plays a vital role in the economy by managing the nation's monetary policy, primarily through adjustments to interest rates. When the Fed cuts rates, it aims to lower borrowing costs, thereby fueling economic activity by encouraging spending and investment. However, the broader implications of these cuts can vary significantly across sectors.

Impact of Rate Cuts on Various Sectors

  1. Utilities: This sector usually thrives during periods of declining interest rates. Utilities are often seen as stable income generators, often paying dividends that attract investors seeking yield. Lower rates can enhance the appeal of these stocks, driving up their prices as more investors flock to safe-haven investments.
  2. Real Estate: Real estate values tend to rise when interest rates drop. The cost of mortgages typically decreases, making home purchases more affordable. Additionally, Real Estate Investment Trusts (REITs) can benefit from cheaper financing for new acquisitions and developments, potentially leading to an uptick in stock prices in this sector.
  3. Financials: Banks and other financial institutions generally face headwinds when rates are cut. Lower interest margins mean that the difference between what they lend and what they pay savers shrinks, eroding profit margins. However, if a rate cut leads to an economic rebound, the sector may eventually benefit from increased lending activity.
  4. Consumer Discretionary: In a low-rate environment, consumers are likely to spend more because they can borrow at reduced costs. Sectors such as retail, automotive, and travel often see increased activity, as consumers take advantage of cheaper loans for homes and cars.
  5. Technology: Companies in the technology sector, particularly those involved in innovative sectors, tend to flourish in lower interest rate environments. These firms often rely on cheap capital for expansion and development, making them attractive investment options during periods of rate cuts.

Analyzing Historical Trends of Market Reactions

Understanding historical market reactions to rate cuts can reveal valuable insights for investors. For example:

  • Post-2008 Financial Crisis: After the Fed cut rates during the crisis, stock markets initially fell due to widespread fear. However, sectors like technology and consumer discretionary eventually flourished, driven by low borrowing costs and increased consumer spending.
  • COVID-19 Pandemic Response: The Fed's aggressive rate cuts in response to the pandemic caused a rapid growth in technology and e-commerce stocks as businesses pivoted to digital platforms. Conversely, traditional sectors like hospitality and travel faced severe downturns before beginning their recovery.

These historical insights emphasize the importance of strategic thinking when it comes to Market Reactions and potential rate cuts, allowing investors to adjust their portfolios accordingly.

The Importance of Diversification

In light of potential rate cuts, one principle stands out: diversification is vital. Spreading investments across various sectors protects against the volatility commonly triggered by rate changes. Here are a few ways to diversify effectively:

  • Bond Funds: These can offer stability when interest rates are falling, as bond prices generally increase in such environments.
  • Global Investments: Investing in international equities can balance risks associated with U.S. economic fluctuations.
  • Defensive Stocks: Companies in consumer staples, which provide essential goods, tend to be less volatile during economic downturns, making them attractive in uncertain times.

Investment Strategies in a Low-Rate Environment

As interest rates shift, investors may need to revisit their strategies. Here are some considerations:

  1. Review Asset Allocation: Conduct a thorough review of current asset distribution across sectors. Adjust allocations to enhance exposure to potential beneficiaries of lower rates.
  2. Look for Growth Opportunities: Focus on sectors poised for growth in a low-rate environment, such as technology and consumer discretionary, where consumers may increase spending.
  3. Emphasize Quality: Seek out companies with strong fundamentals, such as solid earnings, low debt levels, and consistent cash flow, as they are more likely to thrive regardless of economic conditions.
  4. Engage with Fixed Income: In times of low rates, fixed income investments remain important. Look for opportunities in municipal bonds or high-quality corporate bonds.
  5. Stay Informed: Keep track of economic indicators, Fed announcements, and overall market trends. This will help you anticipate adjustments that might benefit or challenge your investments.

Position Yourself Ahead of the Interest Rate Cut

When interest rates drop, real estate prices often surge. Now is your window to lock in investment properties before competition and prices rise.

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Investor Sentiment and Market Behavior

Understanding investor sentiment plays a crucial role in deciphering Market Reactions during rate changes. Emotional responses can lead to sudden shifts in market trends, where panic selling or exuberance can amplify volatility.

Behavioral finance highlights the tendency for investors to react emotionally to news rather than logically. This can create opportunities for disciplined investors who remain grounded in their strategic plans. By resisting the urge to make knee-jerk reactions during economic uncertainty, investors can weather the storm and seize opportunities.

My Opinion

As we look ahead to potential rate cuts, several sectors exhibit promising prospects, especially utilities and real estate. However, financial institutions may continue to face challenges if rates drop. Keeping a close eye on consumer sentiment and sector performance will be essential.

Conclusion

While discussions of potential rate cuts can create uncertainty, they also present opportunities for savvy investors. By understanding the historical context, assessing sector impacts, and revisiting investment strategies, you can better position your portfolio for future success. As you navigate these changes, remember the importance of diversification and informed decision-making in mitigating risks associated with market fluctuations.

Also Read:

  • How Low Will Interest Rates Go?
  • Interest Rate Predictions for the Next 3 Years
  • Interest Rate Predictions for Next 2 Years: Expert Forecast
  • Interest Rate Predictions for Next 10 Years: Long-Term Outlook
  • When is the Next Fed Meeting on Interest Rates?
  • Interest Rate Cuts: Citi vs. JP Morgan – Who is Right on Predictions?
  • More Predictions Point Towards Higher for Longer Interest Rates

Filed Under: Economy, Financing Tagged With: Economy, interest rates

Fed Predicted to Deliver Only One Interest Rate Cut in 2025

May 22, 2025 by Marco Santarelli

Fed Predicted to Deliver Only One Interest Rate Cut in 2025

The question on everyone's mind in the financial world right now is: when will interest rates come down? Well, according to Atlanta Fed President Raphael Bostic, we might only see one interest rate cut in 2025. This outlook, which he shared recently, hinges largely on the time it will take for the Federal Reserve to fully grasp the economic consequences of the White House's new tariff policies. So, if you're hoping for a significant easing of borrowing costs this year, you might need to adjust your expectations.

Fed Predicted to Deliver Only One Interest Rate Cut in 2025

For a while now, the Fed has been walking a tightrope, trying to bring down inflation without sending the economy into a tailspin. We've seen interest rates stay higher for longer than many initially anticipated. Now, with the added layer of uncertainty from these new tariffs, it seems the Fed is taking an even more cautious approach. Bostic himself adjusted his earlier forecast of two rate cuts down to just one, and it seems his reasoning is pretty sound.

The Tariff Tango: A Waiting Game for the Fed

The core of Bostic's thinking revolves around the fact that understanding the true impact of these tariffs won't be an overnight process. He pointed out that the scale and variety of the proposed tariffs across different sectors and countries are much broader than what was initially anticipated at the start of the year. This isn't just a minor tweak in trade; it's a potentially significant shift that could ripple through the entire economy.

Think about it from a business perspective. If a company suddenly faces higher costs on imported materials due to tariffs, they have a few choices: absorb the cost, try to find alternative (and potentially more expensive or lower quality) suppliers, or pass those costs on to consumers through higher prices. We've already seen some big players, like Walmart, hinting at the possibility of price increases.

This is where the Fed's concern about inflation comes back into play. If businesses across the board start raising prices to offset tariff-related costs, we could see a resurgence of inflationary pressures. And after all the effort to bring inflation down, that's the last thing the Fed wants.

Bostic emphasized that the details of these tariffs are crucial and that it will take three to six months to really get a clear picture of how they're affecting the economy at an aggregate level. This waiting period is why he believes there will be less room than previously expected for interest rate cuts this year. The Fed needs to see the data, analyze the trends, and understand the full implications before making any definitive moves.

More Than Just Numbers: The Human Element of Economic Policy

What I find particularly insightful in Bostic's comments is the recognition of the human element in all of this. He talked about how businesses were caught off guard by the tariff policies, having perhaps expected a different economic agenda. This surprise can lead to hesitation and uncertainty when it comes to investment decisions. If businesses are unsure about future costs and demand due to tariffs, they might be less willing to invest in expansion, hiring, and innovation.

Furthermore, the foreboding that Bostic mentioned – the feeling that the impact of tariffs is coming even if we're not seeing it fully in prices yet – can also influence consumer behavior. If people are worried about higher prices down the line, they might become more cautious with their spending, which could slow down economic growth.

This highlights a key aspect of economic policy that often gets overlooked in dry data and charts: sentiment and expectations matter a lot. If people believe inflation will go up, their behavior can actually contribute to that outcome. This is why the Fed pays close attention to inflation expectations, both in the short and long term.

My Take on the Situation: A Cautious Stance Makes Sense

Personally, I think Bostic's cautious outlook on interest rate cuts is a pragmatic one. The introduction of significant tariffs throws a wrench into the economic machinery, and it's wise for the Fed to take a step back and assess the situation before making any drastic moves on interest rates.

We've seen how quickly economic conditions can change, and rushing into rate cuts before understanding the full impact of these tariffs could have unintended consequences, potentially reigniting inflation or creating new economic imbalances.

The Fed's dual mandate is to maintain price stability and maximum employment. Right now, it seems the focus is more on the inflation side, especially given the uncertainty surrounding tariffs. While a single interest rate cut in 2025 might be disappointing for those hoping for lower borrowing costs, it reflects a careful approach to navigating a complex and evolving economic landscape.

What This Means for You

So, what does this outlook mean for everyday folks and businesses?

  • Borrowers: If you're planning on taking out a loan (mortgage, car loan, etc.), don't necessarily count on significantly lower interest rates this year. Plan your finances accordingly.
  • Savers: Higher interest rates on savings accounts and fixed-income investments might persist for a bit longer.
  • Businesses: Be prepared for potential cost increases due to tariffs and factor that into your pricing and investment strategies. The uncertainty also underscores the importance of flexibility and adaptability.
  • Investors: The market might experience some volatility as it digests the implications of the tariff policies and the Fed's cautious stance. Focus on long-term fundamentals and diversification.

Looking Ahead: The Data Will Tell the Tale

Ultimately, the actual path of interest rates in 2025 will depend on the economic data that emerges in the coming months. We'll be closely watching inflation figures, consumer spending, business investment, and of course, the real-world impact of the tariffs. Bostic himself acknowledged that the range of possibilities for the U.S. economy is still quite wide.

While his current leaning is towards one rate cut, the Fed's decisions are data-dependent. If inflation shows persistent signs of easing and the impact of tariffs appears manageable, there could be room for more easing. Conversely, if inflation remains sticky or tariffs lead to significant price pressures, even one rate cut might be off the table.

Bottom Line

Atlanta Fed President Bostic's prediction of only one interest rate cut in 2025 is a significant piece of the puzzle in understanding the future direction of monetary policy. His rationale, rooted in the need to assess the economic impact of new tariffs, highlights the complexities and uncertainties facing the Federal Reserve. While this outlook might adjust as more data becomes available, it serves as a crucial reminder that the path to lower interest rates might be longer and more gradual than some had hoped. Staying informed and understanding the factors influencing the Fed's decisions is key to navigating the economic landscape ahead.

“Position Your Investments for the Next Decade”

With interest rates expected to remain high, smart investors are locking in real estate opportunities now to build long-term passive income and hedge against rising costs.

Norada offers turnkey, fully managed properties in high-demand markets—perfect for building wealth regardless of the rate environment.

HOT NEW LISTINGS JUST ADDED!

Speak to a Norada investment advisor today (No Obligation):

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Recommended Read:

  • Interest Rate Predictions for the Next 10 Years: 2025-2035
  • Will the Bond Market Panic Keep Interest Rates High in 2025?
  • Interest Rate Predictions for 2025 by JP Morgan Strategists
  • Interest Rate Predictions for Next 2 Years: Expert Forecast
  • Fed Holds Interest Rates But Lowers Economic Forecast for 2025
  • Fed Indicates No Rush to Cut Interest Rates as Policy Shifts Loom in 2025
  • Fed's Powell Hints of Slow Interest Rate Cuts Amid Stubborn Inflation
  • Fed Funds Rate Forecast 2025-2026: What to Expect?
  • Interest Rate Predictions for 2025 and 2026 by NAR Chief
  • Market Reactions: How Investors Should Prepare for Interest Rate Cut
  • Interest Rate Predictions for the Next 3 Years
  • Impact of Interest Rate Cut on Mortgages, Car Loans, and Your Wallet
  • Interest Rate Predictions for Next 10 Years: Long-Term Outlook
  • When is the Next Fed Meeting on Interest Rates?
  • Interest Rate Cuts: Citi vs. JP Morgan – Who is Right on Predictions?
  • More Predictions Point Towards Higher for Longer Interest Rates

Filed Under: Economy, Financing, Mortgage Tagged With: Economy, Fed, Federal Reserve, Interest Rate, mortgage

Gold Price Forecast: Experts Predict Prices Will Hit $6,000 by 2029

May 13, 2025 by Marco Santarelli

Gold Price Forecast: Experts Predict Prices Will Hit $6,000 by 2029

You know, lately I've been digging into what's happening with gold, and let me tell you, some experts are making some pretty bold predictions. The gold price forecast is definitely turning heads, with whispers of it potentially soaring to a staggering $6,000 per ounce by 2029. That's a massive jump from where we are now! Analysts at JPMorgan suggest this could happen if even a small fraction – just 0.5% – of the U.S. assets held by investors outside the country shifts towards gold. It sounds like a big “if,” but let's dive deeper into why this might actually be more plausible than you think.

Gold Price Forecast: Could Prices Really Hit $6,000 by 2029?

Why the Buzz Around Gold?

For ages, gold has been seen as a safe haven, a place to park your money when things get a little shaky in the world. And lately, there's been no shortage of shaky situations! Think about it:

  • Global Uncertainty: From geopolitical tensions to economic worries, there's a lot making investors nervous. Gold tends to shine when traditional assets like stocks look risky.
  • Central Bank Actions: After Russia's invasion of Ukraine and the subsequent freezing of some of its assets, it seems like many central banks are rethinking their reliance on certain currencies. This has led to increased gold buying as a way to diversify their holdings.
  • Inflation Fears: When the cost of everyday things goes up, people often turn to gold as a way to preserve their wealth because it's seen as a hedge against inflation.
  • Government Debt: The amount of money some governments owe is also raising concerns, and gold is often viewed as a more stable alternative.

Now, when you throw in the possibility of even a tiny shift in how much faith foreign investors have in U.S. assets, as JPMorgan's analysts point out, the impact on gold prices could be huge. Why? Because the supply of gold doesn't really grow that much each year. So, even a small increase in demand can lead to a significant jump in price.

The Trump Factor and Shifting Global Dynamics

Interestingly, the analysts at JPMorgan highlighted that the trade war initiated by former President Trump actually added fuel to gold's rally. It made some foreign investors question the stability of U.S. assets. Plus, talk about “burden sharing” – suggesting that other countries benefiting from the dollar's reserve currency status should contribute more – might also be making some investors abroad a bit uneasy.

As the JPMorgan analysts put it, “The recent period in financial markets has demonstrated that interest and trust in US assets are already being questioned, and the US is vulnerable to capital outflows.” This is a pretty significant statement. If this trend continues, even a small trickle of money moving from U.S. assets to gold could create a big wave in the gold market.

Breaking Down the Numbers: 0.5% Can Make a Big Difference

Let's get into the nitty-gritty. JPMorgan estimates that if just 0.5% of the total U.S. assets held by foreign investors were reallocated to gold, it would mean about $273.6 billion flowing into the precious metal over four years. That's roughly 2,500 metric tons of gold.

Now, while 2,500 metric tons might sound like a lot, it's only about 3% of the total gold holdings worldwide. However, as the analysts point out, “the additional demand impulse on a quarterly basis is quite immense.” Because the supply of new gold is limited, this extra demand could really push prices upwards. They even project that this scenario could lead to annual returns of around 18% for gold investors!

My Thoughts on This Bold Prediction

Honestly, while an 80% jump to $6,000 by 2029 sounds like a huge leap, the reasoning behind it makes a lot of sense to me. We're living in a time of significant global shifts and uncertainties. The traditional faith in the dominance of U.S. assets isn't as rock-solid as it once seemed.

Factors like:

  • Geopolitical Instability: Conflicts and tensions around the world are likely to continue driving investors towards safe-haven assets.
  • Inflationary Pressures: While there have been efforts to control inflation, it remains a concern, and gold has historically acted as a good hedge.
  • Currency Debasement: Massive government spending and quantitative easing can sometimes lead to the devaluation of currencies, making gold more attractive.

These are all ongoing issues that could very well contribute to a sustained increase in the demand for gold.

Of course, it's important to remember that this is just one potential scenario put forth by analysts. The future is uncertain, and there are many factors that could influence the price of gold. For instance, a sudden period of strong global economic growth and renewed confidence in traditional assets could dampen the enthusiasm for gold.

What Other Experts Are Saying

It's also worth noting that JPMorgan isn't the only one with a bullish outlook on gold. Earlier this year, Goldman Sachs also raised its year-end gold price forecast, suggesting it could even approach $4,500 in some extreme cases. This kind of consensus among major financial institutions adds weight to the idea that gold still has significant upside potential.

Navigating the Gold Market

If you're thinking about investing in gold, it's crucial to do your own research and understand the risks involved. You can invest in gold in various ways, including:

  • Physical Gold: Buying gold bars or coins.
  • Gold ETFs (Exchange-Traded Funds): These funds track the price of gold and can be traded like stocks.
  • Gold Mining Stocks: Investing in companies that mine gold (though their performance can be influenced by factors beyond just the price of gold).

Each of these options has its own set of advantages and disadvantages, so it's important to choose what aligns best with your investment goals and risk tolerance.

Final Thoughts: A Golden Opportunity or Just Wishful Thinking?

While predicting the future price of anything is always a tricky business, the scenario laid out by JPMorgan's analysts regarding the gold price forecast to $6,000 by 2029 is certainly compelling. The confluence of global uncertainties, potential shifts in investment preferences, and the limited supply of gold creates a strong argument for continued price appreciation.

Whether it reaches that exact $6,000 mark remains to be seen. However, based on the current trends and the analysis from experts, it seems to me that gold is likely to remain a significant asset in the years to come, and its price could indeed climb considerably higher. It's definitely something I'll be keeping a close eye on!

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10-Year Treasury Yield Rises After US-China 90-Day Tariff Deal

May 13, 2025 by Marco Santarelli

10-Year Treasury Yield Rises After US-China 90-Day Tariff Deal

The bond market reacted when the US-China 90-Day Tariff Truce was announced. This temporary break in the trade war between the world's two largest economies led investors to become a bit less scared about the future, causing them to sell off safe-haven assets like U.S. Treasury bonds. This selling pressure pushed the price of bonds down, and as you probably know, when bond prices fall, their yields – specifically the 10-year Treasury yield – go up.

How the US-China 90-Day Tariff Truce Sent 10-Year Yields Climbing

Think of it like this: when there's a lot of worry in the air about things like a potential recession caused by escalating tariffs, people want the security of government bonds, even if the return isn't huge. This increased demand pushes bond prices up and yields down. But when a bit of good news comes along, like this tariff truce, that worry eases. Investors feel more comfortable putting their money into potentially higher-growth areas, and they're less desperate for the safety of bonds. Hence, they sell bonds, prices drop, and yields rise.

This wasn't just a tiny blip either. The announcement caused a noticeable jump in the 10-year Treasury yield, reaching its highest point in about a month. To put it in numbers, we saw the yield climb to around 4.45%, a significant increase from the lower levels we saw earlier in April. This jump tells us a story about how sensitive the bond market is to the ebbs and flows of global trade tensions.

A Look Back: Tariffs and the Bond Market's Twists and Turns

This recent reaction wasn't out of the blue. We've seen this movie before, haven't we? Remember back in early April when there was news about new tariffs being slapped on Chinese goods? Initially, investors got spooked and flocked to the safety of Treasury bonds, causing yields to dip. But then, almost as quickly as they fell, yields bounced back up. This showed us that while tariff escalations can initially trigger a flight to safety (pushing yields down), they can also lead to fears of higher inflation and slower growth down the line, which can ultimately push yields higher.

It's almost like the market is constantly trying to figure out the puzzle. Is a tariff hike going to lead to a recession, making safe bonds attractive? Or will it lead to higher prices, making those fixed-income returns less appealing? The US-China 90-Day Tariff Truce news fell squarely into the “de-escalation” category. Historically, when there's a pause or a rollback of tariffs, the immediate reaction is often a sell-off in bonds, leading to higher yields. This truce basically signaled that the worst-case scenario of ever-increasing tariffs might be avoided, at least for now.

What the Experts Are Saying: A Collective Sigh of Relief (with a Pinch of Salt)

It wasn't just the numbers on the screen that told the story. Analysts and market strategists around the world had plenty to say about this 90-day tariff truce and its impact. Many pointed out that the scale of the tariff reductions was actually quite surprising. Some even used phrases like “much bigger than expected,” which highlights the sense of relief that rippled through the markets.

However, this optimism came with a healthy dose of caution. Experts reminded us that this is just a temporary pause. The underlying issues between the US and China haven't magically disappeared. As one analyst put it, it's a “long-term positive plus 90 days of uncertainty.” The tariffs are significantly lower during this truce (U.S. tariffs on some Chinese imports dropped from 145% to 30%, and China's duties on some U.S. goods fell from 125% to 10%), but the fact remains that tariffs still exist.

Here are some key takeaways from the expert commentary:

  • Relief is Temporary: While the market breathed a sigh of relief, the 90-day window means the threat of renewed or even higher tariffs looms in the future.
  • Uncertainty Remains: Even with the reduced tariffs, the fundamental trade disputes between the two nations are still unresolved, creating ongoing uncertainty for businesses and investors.
  • Impact on Growth: While the truce is seen as positive for short-term growth by easing supply chain concerns, the lingering tariffs and potential for future escalation still pose a risk.
  • Inflationary Pressures: Even with the tariff reductions, some level of tariffs remains, which will likely continue to contribute to inflationary pressures, albeit less than before.

The Fed's Perspective: Less Pressure for Rate Cuts?

The Federal Reserve also weighed in on the implications of the US-China 90-Day Tariff Truce. One Fed official noted that this development should help to ease some of the inflation that was being driven by the trade war. This good news also led to a slight shift in market expectations for future interest rate cuts. With the immediate threat of escalating tariffs diminished, the pressure on the Fed to lower rates to stimulate the economy seemed to lessen, at least in the short term.

However, it's important to remember that even with the reduced tariffs, they still exist, and a Fed Governor pointed out that a 30% tariff will still lead to higher prices and slow down the economy to some degree. So, while the truce might have pushed out expectations for rate cuts, it didn't completely eliminate them. The Fed will likely continue to monitor the situation closely, paying attention to both inflation data and economic growth indicators.

Beyond Bonds: A Ripple Effect Across Global Markets

The impact of the US-China 90-Day Tariff Truce wasn't limited to just the bond market. We saw a broader “risk-on” sentiment take hold across global markets. Stock markets in the US, Europe, and Asia generally rallied on the news. This makes sense because a de-escalation in trade tensions is seen as a positive for corporate earnings and overall economic activity.

Interestingly, the US dollar also strengthened against many other currencies. This could be because the truce was seen as particularly beneficial for the US economy in the short term. On the other hand, safe-haven assets like gold, which tend to do well when investors are worried, saw their prices fall as the immediate fear of a full-blown trade war subsided.

China's markets also reacted positively. The Chinese stock market went up, and the yuan, their currency, reached a six-month high. This reflects the fact that Chinese officials also viewed the truce as a positive development for their businesses and for global stability.

The Bigger Picture: Buying Time, Not Solving the Problem

While the US-China 90-Day Tariff Truce provided a welcome break from the escalating trade tensions, it's crucial to understand what it really represents. In my opinion, it's more of a temporary pause – a chance for both sides to come back to the negotiating table and try to find a more lasting solution. It doesn't erase the fundamental disagreements that led to the trade war in the first place.

Think about it: even with the reduced tariffs during this 90-day period, US consumers are still facing an average tariff level that's higher than it's been since the 1930s. This tells us that while the immediate pain might be lessened, the underlying cost of the trade war hasn't gone away entirely. Estimates suggest that the tariffs put in place are still expected to raise US price levels and dampen economic growth to some extent.

So, while I was as relieved as many others to see this truce, I also know that we're not out of the woods yet. The next 90 days will be crucial. Will this temporary break lead to a more permanent agreement, or will we see tensions flare up again? That's the big question mark hanging over the global economy right now, and it's something that will continue to influence the bond market and beyond.

“Secure Real Estate While Treasury Yields Climb”

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Will the Bond Market Panic Keep Interest Rates High in 2025?

May 12, 2025 by Marco Santarelli

Will the Bond Market Panic Keep Interest Rates High in 2025?

The recent turmoil in the bond market has understandably left many wondering about the future of interest rates. As of May 12, 2025, the 10-year U.S. Treasury yield stood at a notable 4.382%, signaling a period of stress in this critical sector of the global financial system. The big question on everyone's mind, and what we'll delve into here, is whether this bond market panic will keep rates high. My take is that while the immediate reaction has been an increase in yields and thus interest rates, the long-term trajectory is far from set in stone and hinges on a complex interplay of factors.

Will the Bond Market Panic Keep Interest Rates High in 2025?

To really understand what's happening now and what might happen next, it's important to grasp some fundamental concepts about the bond market. Think of bonds as essentially IOUs. When governments or companies need to borrow money, they issue these bonds. Investors who buy them are lending money and in return, they get periodic interest payments, known as coupons, and the original amount they lent back when the bond matures.

Now, here's a key point: bond prices and their yields move in opposite directions. When a lot of people want to sell bonds (increasing supply or pressure), the price goes down. Because the fixed coupon payments are now a larger percentage of the lower price, the yield – the actual return an investor gets – goes up.

The 10-Year U.S. Treasury yield is a really big deal because it acts as a benchmark for so many other interest rates in the economy. This includes things like mortgage rates, the interest you pay on corporate loans, and even how much the government itself has to pay to borrow money. A higher 10-year Treasury yield generally tells us that investors want more compensation for holding onto longer-term debt. This could be because they expect higher inflation down the road, they see more economic uncertainty, or they perceive a greater risk.

What's Causing the Current Bond Market Turmoil?

Lately, the bond market has definitely been a bit rocky. We've seen some pretty significant and rapid sell-offs, leading to those higher Treasury yields. From my perspective, this isn't just one thing happening; it's a combination of different forces all hitting at once:

  • Trade Tensions: Remember those back-and-forth tariffs between the U.S. and China? Well, they're still casting a shadow of uncertainty over the global economy. When businesses and investors get nervous about trade wars, they tend to become more cautious. We've seen some investors pulling back from assets they see as riskier, and that can sometimes include selling off bonds, even U.S. Treasuries which are usually seen as a safe harbor in stormy times. This selling pressure pushes bond prices down and yields up.
  • Debt Ceiling Concerns: Earlier in 2025, the U.S. government bumped up against its debt ceiling. This is like reaching the limit on your credit card. While the Treasury Department has been using what they call “extraordinary measures” to keep things running, it creates a sense of unease. A limited supply of new Treasury bonds being issued can actually lead to higher yields because the demand for existing bonds might outstrip what's available. It introduces a bit of a liquidity squeeze.
  • Federal Reserve Policy Expectations: The Federal Reserve, our central bank, plays a huge role in all of this. They've already cut interest rates three times in 2024, bringing their main rate (the federal funds rate) down to a range of 4.25%-4.50%. Now, everyone's trying to guess what they'll do next. Some folks are worried that if inflation doesn't cool down or if the economy stays surprisingly strong, the Fed might not cut rates as much or as quickly as some hope. This expectation of potentially higher rates for longer can also push bond yields higher.

It's been a bit unusual recently because we've seen both the stock market and the bond market declining at the same time. Usually, when stocks get shaky, investors tend to flock to the relative safety of bonds. But the factors I've mentioned above have kind of messed with that traditional pattern, making people even more concerned about the stability of the bond market.

Here's a quick look at some of the drivers:

Factors Driving Bond Market Panic Impact on Yields
Trade Tensions Increase Yields increase due to risk aversion and economic uncertainty.
Debt Ceiling Concerns Yields increase due to reduced bond supply and liquidity issues.
Fed Policy Expectations Yields increase if investors anticipate higher rates for longer.

How Does This Impact Interest Rates for Everyone Else?

The bond market's ups and downs have a very real effect on the interest rates we see in our daily lives:

  • Mortgages: When those Treasury yields go up, so do mortgage rates. We've already seen some back and forth, with the average 30-year fixed rate hovering around 6.64% in early 2025. While that's a bit lower than the 7.04% we saw in late 2024, it's still quite a bit higher than what we were used to before the pandemic. For people looking to buy a home, this means higher monthly payments.
  • Consumer and Business Loans: Things like credit card interest rates, car loan rates, and the cost for businesses to borrow money are also tied to those Treasury yields. If yields stay high, it becomes more expensive for individuals to borrow and for businesses to invest and expand.
  • Economic Growth: Higher interest rates can act like a brake on the economy. When borrowing becomes more expensive, people might be less likely to spend, and businesses might put off investments. This is a real concern, especially when we're already dealing with global trade issues and other uncertainties.

The current 10-year Treasury yield of 4.382% is definitely higher than the lows we saw in 2024, but it's also not the highest we've seen historically during periods of market stress. However, the speed at which we've seen these yields rise recently is what's making people nervous about the possibility of sustained high rates.

So, Will Rates Actually Stay This High?

This is the million-dollar question, isn't it? Whether this bond market panic will translate into persistently high interest rates over the long haul depends on how several key factors play out:

  • The Resolution of Trade Tensions: If the U.S. and China can actually reach a solid trade agreement, I think that would be a big sigh of relief for investors. It could boost confidence and reduce the need for those higher yields as a safety cushion. Easing tariffs could also help bring down some of those inflationary pressures we've been seeing, which might give the Fed more room to cut rates. On the flip side, if trade tensions get even worse, investors might continue to demand higher yields to compensate for the added economic uncertainty.
  • Getting Past the Debt Ceiling Drama: A swift and clean resolution to the U.S. debt ceiling issue would bring some much-needed stability to the Treasury market. Knowing there's a steady supply of bonds should help ease those liquidity concerns and potentially bring yields down. However, if there are more political battles and delays, that could keep the market on edge and yields elevated.
  • What the Federal Reserve Does Next: The Fed's moves are going to be crucial. As of March 2025, they've held their key interest rate steady. Their own forecasts suggest they might cut rates twice more in 2025, which, if it happens, could help bring down those longer-term bond yields. But, and this is a big but, if inflation proves to be stickier than they hope or if the economy stays stronger than expected, the Fed might decide to hold off on those cuts, meaning rates could stay higher for longer.
  • What the Market is Expecting: Right now, the market seems to be pricing in a scenario where rates might not fall dramatically in 2025, but they're also not expected to shoot way up. For instance, I've seen predictions from Bankrate suggesting the Fed might cut rates three more times in 2025. The Mortgage Bankers Association is also forecasting a gradual decline in mortgage rates into 2026. However, these are just forecasts, and they all assume that some of these current uncertainties will start to ease. If those trade tensions or debt ceiling issues drag on, things could look quite different.
  • The Global Economic Picture: If we see a slowdown in the global economy, that could actually increase demand for safe assets like U.S. Treasuries, which could, counterintuitively, push yields lower. But if the U.S. economy remains resilient while other parts of the world struggle, investors might still demand higher yields here to account for potential inflation risks.

Here's a summary of how these factors might influence future rates:

Factors Influencing Future Rates Likely Impact
Trade Agreement Lower yields and interest rates.
Debt Ceiling Resolution Lower yields if resolved; higher if there are delays.
Fed Rate Cuts Lower yields if they are implemented.
Global Slowdown Lower yields due to increased demand for safe assets.
Persistent Inflation Higher yields if the Fed holds off on rate cuts.

What the Experts Are Saying and My Own Thoughts

When I look at what various experts are saying, it's clear there's no single, unified view. Some optimists believe this bond market jitters are just temporary. They think that once those trade issues calm down and the debt ceiling is sorted, we'll see investor confidence bounce back, leading to lower yields and interest rates. The Fed's projected rate cuts also lend some support to this idea.

On the other hand, the pessimists are more worried. They point to ongoing geopolitical risks and the stubbornness of economic uncertainty as reasons why yields might stay elevated. If that trade war escalates or if inflation doesn't come down as much as hoped, the Fed might feel stuck keeping rates higher, which would put more pressure on bond prices.

Personally, I think the recent behavior of the bond market suggests that investors are bracing for a scenario where rates might stay higher for a bit longer than we initially anticipated. However, I don't necessarily see this as meaning rates will stay at these exact levels forever. Instead, it feels like the market is adjusting to a new reality where uncertainty is just a bigger part of the equation.

In Conclusion

The recent bond market panic has definitely played a role in pushing Treasury yields higher, and this, in turn, affects the interest rates we see throughout the economy. However, whether this panic will lead to a sustained period of high rates is still very much up in the air.

If we see some positive developments – like a resolution to trade disputes and a smooth handling of the debt ceiling – there's a good chance that bond yields could stabilize or even decline, which would eventually lead to lower interest rates. But if these issues persist or get worse, we could be looking at a scenario where borrowing costs remain elevated for consumers and businesses.

Right now, the Federal Reserve seems to be treading carefully, holding rates steady but signaling a potential for future cuts. However, the market's reaction suggests that there's still a lot of nervousness about what the future holds.

Ultimately, the direction of interest rates will depend on how those global trade issues, our domestic fiscal policy, and the Fed's response to economic data all come together. While the bond market's recent volatility has created some short-term pain, the long-term impact on rates will really hinge on how these bigger, broader forces play out.

Secure Real Estate Before Rates Rise Further

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US Tariffs Reach the Highest Level in the Last 100 Years: IMF Data

May 11, 2025 by Marco Santarelli

US Tariffs Reach the Highest Level in the Last 100 Years: IMF Data

When I first heard that the US tariffs are the highest in the last 100 years, my initial reaction was a bit of disbelief. Could it really be that we've gone back to levels not seen since the tumultuous times of the Great Depression? Well, according to the International Monetary Fund (IMF), the data doesn't lie. The recent surge in US effective tariff rates has indeed pushed them beyond anything we've witnessed in a century, and this significant shift in trade policy is sending ripples throughout the global economy.

As someone who's followed economic trends for a while now, I can tell you that this isn't just some abstract statistic. It has real-world implications for businesses, consumers, and the overall stability of the global marketplace. This article will delve deeper into the factors driving this increase, the potential consequences, and what it all means for the future of international trade.

US Tariffs Reach Century-High Levels: A Threat to Global Growth?

Understanding the Climb: A Look at US Tariff History

To truly grasp the significance of where we are today, it's helpful to take a quick look back at US tariff history. The IMF chart paints a vivid picture, showing peaks and valleys in US effective tariff rates over the past century and a half.

  • The Tariff of Abominations (1828): As the chart highlights, the US has seen high tariff periods before. The Tariff of Abominations stands out as a particularly protectionist measure that significantly increased duties on imported goods.
  • The Smoot-Hawley Tariff Act (1930): This is another historical high point that often comes to mind when discussing tariffs. Enacted during the Great Depression, it aimed to protect American industries but is widely believed to have worsened the global economic downturn by triggering retaliatory tariffs from other countries.
  • The General Agreement on Tariffs and Trade (GATT) and the World Trade Organization (WTO): In the post-World War II era, there was a global push towards trade liberalization. Agreements like GATT, and later the WTO, aimed to reduce tariffs and promote free trade. This period saw a general decline in US tariff rates.
  • The Recent Surge: The chart clearly indicates a sharp upward trend in US tariffs in recent years, culminating in the current levels that surpass even those seen during the Smoot-Hawley era.

This historical context is crucial. For decades, the trend was towards lower trade barriers. This recent reversal marks a significant departure and raises serious questions about the future of global trade relations.

US Tariffs Reach Century-High Levels: A Threat to Global Growth?
Source: IMF

The Drivers Behind the Hike: Why Are US Tariffs So High Now?

Several factors have contributed to this surge in US tariffs. From my perspective, a key driver has been a shift in trade philosophy, emphasizing national security and the protection of domestic industries from foreign competition.

  • Trade Disputes and National Security Concerns: Recent years have seen the imposition of tariffs on goods from various countries, often justified on the grounds of national security or unfair trade practices.
  • Specific Country Tariffs: The IMF data highlights specific actions, such as tariffs on goods from China. These targeted measures have significantly contributed to the overall increase in the US effective tariff rate.
  • Counter-Responses: As the IMF points out, the US isn't acting in a vacuum. Counter-responses from major trading partners, in the form of retaliatory tariffs, have further pushed up the global average tariff rate.

It's a complex web of actions and reactions, and as an observer, I can see how easily such measures can escalate, leading to a situation where everyone ends up paying the price.

The Economic Fallout: What Are the Potential Consequences?

The IMF report doesn't mince words about the potential economic fallout from these high tariffs and the resulting uncertainty. Here's how I see it playing out:

  • Slower Global Growth: The most immediate concern is the impact on global economic growth. The IMF has already revised its growth forecasts downwards, attributing a significant portion of this reduction to the recent tariff hikes. As trade becomes more expensive and less predictable, businesses are likely to become more cautious, leading to reduced investment and spending.
  • Increased Inflation: Tariffs essentially act as a tax on imports. This increased cost is often passed on to consumers in the form of higher prices, contributing to inflation. The IMF has also revised its inflation forecasts upwards, partly due to these trade measures. In my opinion, this erodes the purchasing power of ordinary people.
  • Disrupted Supply Chains: Global supply chains have become increasingly intricate, with goods crossing borders multiple times before reaching their final destination. Tariffs can disrupt these complex networks, leading to inefficiencies and higher costs for businesses. The IMF notes that while businesses have been able to reroute trade flows to some extent, this may become increasingly difficult.
  • Negative Impact on Specific Countries: The effects of tariffs aren't uniform across the globe. The IMF highlights that tariffs act as a negative supply shock for the country imposing them, as resources are diverted to less competitive domestic industries. For trading partners, they often represent a negative demand shock.
    • United States: The IMF has lowered its US growth forecast and raised its inflation forecast, with tariffs playing a significant role.
    • China: China's growth forecast has also been revised downwards, and inflation is expected to be lower due to reduced demand for its products.
    • Euro Area: While facing relatively lower tariffs, the euro area's growth forecast has also seen a slight downward revision.
    • Emerging Markets: Many emerging market economies could face significant slowdowns depending on the extent of the tariffs imposed on their exports.
  • Increased Uncertainty: Beyond the direct economic impacts, the increased uncertainty surrounding trade policy can also have a chilling effect on business activity. Companies facing uncertain market access may delay investments and hiring decisions, further dampening economic growth.

From my perspective, this is a classic case of short-term protectionist measures potentially leading to long-term economic pain.

the effect of US tariffs varies across countries
Source: IMF

Beyond the Numbers: The Human Element

It's easy to get lost in the economic data and forget the human element. But these tariffs have real consequences for people's lives:

  • Consumers: Higher prices for everyday goods can strain household budgets, especially for those with lower incomes.
  • Workers: While some domestic industries might see a temporary boost, others that rely on imported inputs or export to countries facing retaliatory tariffs could face job losses.
  • Businesses: From small businesses to large corporations, navigating this complex and uncertain trade environment can be challenging, requiring significant adjustments to supply chains and pricing strategies.

In my view, policymakers need to carefully consider these human costs when implementing trade policies.

The Path Forward: Navigating a New Era of Trade

The IMF suggests that the global economy is entering a new era, where established trade rules are being challenged. So, what's the way forward?

  • Restoring Trade Policy Stability: The IMF emphasizes the need to restore stability to trade policy and forge mutually beneficial agreements. A clear and predictable trading system is crucial for fostering economic growth and reducing uncertainty.
  • Addressing Domestic Imbalances: Over the long term, addressing domestic imbalances through fiscal and structural reforms can help mitigate economic risks and boost global output.
  • Improved International Cooperation: Given the interconnected nature of the global economy, improved cooperation among countries is essential to address trade tensions and develop a more robust and equitable trading system.
  • Agile Monetary and Fiscal Policies: Central banks and governments will need to remain agile in their policy responses to navigate the challenges posed by increased trade tensions and economic uncertainty.

From my standpoint, a move back towards multilateralism and a rules-based international trading system would be the most beneficial path for sustained global economic prosperity.

Final Thoughts: A Moment of Reckoning for Global Trade

The fact that US tariffs are highest in the last 100 years is a stark reminder of the potential fragility of the global trading system. While the motivations behind these policies might be varied, the potential economic consequences are significant and far-reaching. As an observer of these trends, I believe this moment calls for careful consideration, international cooperation, and a renewed commitment to the principles of open and fair trade. The path forward will depend on the choices we make now.

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Interest Rate Predictions for 2025 by JP Morgan Strategists

May 11, 2025 by Marco Santarelli

JP Morgan Predicts Fed Interest Rate Cut in Second Half of 2025

According to a recent analysis from JP Morgan, the Federal Reserve should not start cutting interest rates until the second half of 2025. This prediction comes as the Fed maintains a cautious “wait-and-see” approach, keeping rates steady for now amidst a complex economic backdrop. As someone who's been watching these financial currents for a while, this forecast feels like a realistic assessment of the pressures and uncertainties our economy is currently navigating.

Interest Rate Predictions for 2025 by JP Morgan Strategists

In their May 2025 meeting, the Federal Open Market Committee (FOMC) decided to keep the benchmark interest rate within the 4.25% to 4.5% range. This wasn't a surprise to the markets, which had largely anticipated this decision. What's interesting is the reasoning behind this continued pause.

The Fed's statement highlighted a few key points:

  • The economy is still expanding at a moderate pace.
  • The labor market remains strong.
  • Inflation is slightly above their long-term target of 2%, though significant progress has been made in bringing it down from previous highs.

However, and this is a crucial point, the Fed also acknowledged a growing uncertainty in the economic outlook since their March meeting. They specifically pointed to increased risks of both higher inflation and higher unemployment, partly due to evolving trade policies. This creates a tricky situation. Raising rates further to combat inflation could risk pushing unemployment up, while cutting rates prematurely could reignite inflationary pressures. It's like trying to walk a tightrope in a windy storm.

Why the Delay? JP Morgan's Perspective

JP Morgan's strategists believe that the Fed is in a position where their current policy stance is “in a good place.” This allows them to observe how economic conditions evolve in the coming months before making any significant moves. Vinny Amaru, a Global Investment Strategist at JP Morgan Wealth Management, noted that the recent economic data shows resilience in the labor market and consumer spending, even as general sentiment data has softened. This divergence – what people are doing versus what they're saying – is likely contributing to the Fed's hesitancy. They need to see concrete signs of weakening in consumer activity before they feel confident enough to lower rates.

As someone who analyzes economic indicators regularly, I can see the logic here. Consumer spending has been a surprisingly strong pillar of the economy, even in the face of higher prices. Until that starts to meaningfully cool down, the Fed will likely remain cautious about easing monetary policy.

What This Means for Investors: Navigating the Uncertainty

So, what should investors make of all this? JP Morgan suggests a few key strategies to navigate this period of uncertainty:

  • Know Your Risk Tolerance: With potential for continued market volatility due to unclear tariff policies, it's crucial to ensure your investment portfolio aligns with your long-term financial goals and your comfort level with risk.
  • Watch Economic Data Closely: As Fed Chair Jerome Powell emphasized, the risks of both higher inflation and unemployment have increased. Pay close attention to key data releases, such as the Consumer Price Index (CPI) and jobs reports, as these will heavily influence the Fed's future decisions. The CPI report scheduled for May 13th, 2025, as mentioned in the J.P. Morgan analysis, will be particularly important.
  • Stay Diversified: This is investment advice 101, but it's especially relevant in uncertain times. Diversifying your portfolio across different asset classes and geographies can help mitigate risk. As Amaru rightly points out, the volatility experienced this year underscores the potential benefits of this strategy.

In my opinion, these are sound recommendations. Trying to time the market based on Fed decisions is often a losing game. A well-diversified portfolio, aligned with your risk tolerance and long-term goals, is always a prudent approach.

Looking Ahead: The Second Half of 2025 and Beyond

While JP Morgan anticipates rate cuts in the latter half of 2025, they also emphasize that uncertainty remains elevated. The interplay of inflation, unemployment, and trade policies will be key determinants of when and how aggressively the Fed might move.

It's important to remember that economic forecasts are just that – forecasts. They are based on the best available data and analysis at a given time, but the future is inherently unpredictable. As investors and individuals, we need to stay informed, be prepared for different scenarios, and adjust our strategies as needed.

In Conclusion: A Patient Approach in an Uncertain Climate

The message from JP Morgan's analysis is clear: the Federal Reserve is likely to remain patient and observe how the economic landscape evolves before initiating interest rate cuts. While the expectation is for easing to begin in the second half of 2025, the path forward is far from certain. For investors, this means a continued focus on risk management, staying informed, and maintaining a long-term perspective. It's a time for cautious optimism, but also for preparedness.

“Turnkey Real Estate Investing With Norada”

With the Fed decision looming, investors are seeking stability and strong returns from real assets.

Norada offers carefully selected, cash-flowing investment properties—perfect for navigating uncertain markets.

Over “100” HOT NEW LISTINGS JUST ADDED!

Talk to a Norada investment counselor today (No Obligation):

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Filed Under: Economy, Financing, Mortgage Tagged With: Economy, Fed, Federal Reserve, Interest Rate, mortgage

New US-UK Trade Deal Agreement: Winners, Losers, and What’s Next

May 9, 2025 by Marco Santarelli

New US-UK Trade Deal Agreement: Winners, Losers, and What's Next

Have you ever felt like two old friends, despite living far apart, finally found a way to make things a bit easier when they visit each other? That’s kind of what the new US-UK trade deal agreement, announced on May 8, 2025, feels like in the world of economics. This agreement is a step forward in how the United States and the United Kingdom do business together, aiming to smooth out some of the bumps and make trade a little less complicated. Essentially, it's a pact to lower some of the taxes and rules that make it harder for goods to travel between these two countries.

New US-UK Trade Deal Agreement: Winners, Losers, and What's Next

Now, don't get me wrong, this isn't a complete overhaul of everything. Think of it more like agreeing to share some favorite snacks without all the usual fuss, rather than opening up a giant, unlimited buffet. While it does bring some immediate benefits, like making it cheaper to trade certain things like steel, aluminum, and cars, and opening up new doors for American farmers to sell more of their goods in the UK, it's also important to keep things in perspective. A significant chunk of trade between the two nations still faces the same old 10% tax when entering the US. So, while it’s a welcome development, it's not the whole story.

One of the things I find most interesting about this deal is how it touches on some pretty important debates. For instance, there's been a lot of chatter about food safety standards. Imagine if your friend had a different way of preparing food that you weren't entirely comfortable with – that’s a bit like the concerns some people have about things like US beef coming into the UK. Then there's the angle of fairness. Some folks in the US who make cars and work closely with Canada and Mexico are wondering if this deal gives UK carmakers an unfair advantage.

At the end of the day, it feels like everyone's trying to see the good in this. Leaders on both sides are talking about how this will protect jobs and create new opportunities. And in some ways, I can see their point. For certain industries, this could be a real boost. But I also hear the voices of those who worry that it doesn’t go far enough in cutting down those pesky tariffs and might not be the magic bullet that completely transforms the UK economy after leaving the European Union.

Diving Deeper: What Exactly Does This New Trade Deal Entail?

So, you might be asking, what’s actually in this new US-UK trade deal? Well, on that day back in May 2025, which, interestingly, was also the 80th anniversary of Victory in Europe Day, the US and the UK presented this agreement as a significant moment in their long-standing economic relationship. It’s the first trade deal struck since the US decided to put tariffs on imports from many countries back in April 2025. The main goals are to lower the costs of trade, make it easier for businesses to access each other’s markets, and generally strengthen the economic security between the two nations.

Let's break down some of the key areas this deal covers:

  • Tariff Reductions and Quotas: This is where things get specific. The agreement outlines exactly which goods will see lower taxes (tariffs) and how much of those goods can be traded without these tariffs or at a reduced rate (quotas). Here’s a quick rundown:
    Sector US Provisions UK Provisions
    Agriculture Reallocates a certain amount of existing quotas for UK beef. Removes a 20% tariff on a small amount of US beef and creates a larger duty-free quota. Offers a duty-free quota for a significant amount of US ethanol. Addresses some concerns around Sanitary and Phytosanitary (SPS) standards and aims to improve export processes.
    Automobiles Sets a limit of 100,000 UK-made cars that can enter the US with a reduced 10% tariff (down from a much higher 27.5%). Also includes some arrangements for car parts. Benefits from the lower US tariffs, especially for luxury car brands that sell a lot in the US.
    Steel/Aluminum Eliminates the existing 25% tariffs, bringing them down to 0%. It also sets up a “Most Favored Nation” (MFN) quota for UK steel and aluminum, tied to meeting US supply chain security standards. This was a big win for the UK steel and aluminum industries, as these tariffs had been a major hurdle. It essentially creates a more secure trading relationship for these essential materials.
  • Tackling Non-Tariff Barriers: It's not just about taxes. Sometimes, different rules and regulations can also make trade difficult. This deal aims to smooth out some of these “non-tariff barriers,” especially in agriculture. The idea is to make the standards for things like food safety and plant health more aligned and to make the process of checking goods for export easier. They're also looking at building on existing agreements that recognize each other's standards for industrial goods and trying to work out similar deals for services, which is a huge part of the US-UK economic relationship.
  • Boosting Digital Trade and Economic Security: In today's world, so much business happens online. This agreement has some forward-thinking parts that aim to make digital trade smoother, like encouraging paperless transactions and the digital movement of goods, particularly in financial services. There's also a focus on economic security, with both countries promising to work together on things like making sure investments are safe, controlling what goods can be exported for security reasons, and cracking down on people trying to avoid paying duties. This seems to tie in with the UK’s recent efforts to strengthen its national security and procurement processes.
  • Other Important Pieces: The deal also touches on things like protecting intellectual property (like patents and trademarks), ensuring fair labor practices (including fighting against forced labor), and working together on environmental policies. Interestingly, there's also a clause that allows either country to end the agreement if they give written notice, which suggests that while it's a significant step, it's not necessarily set in stone forever.

Why Does This Agreement Actually Matter?

From where I stand, this new US-UK trade deal has implications on a few different levels.

For the United Kingdom, this deal is part of a broader strategy to find new trading partners after leaving the European Union. Think of it as trying to build a new network of friends after moving away from your old neighborhood. The US is a massive market, so having easier access is a big deal. This agreement could potentially safeguard jobs in important sectors like car manufacturing and steel production, which have faced uncertainty. Plus, opening up the US market more for some UK goods could mean new opportunities for businesses to grow and sell more.

On the other side of the pond, for the United States, this aligns with a more “America First” approach to trade. The idea is to boost American exports and support domestic industries. For example, American farmers now have a better chance to sell more beef and ethanol in the UK, which is a win for that sector. The deal also seems to be about trying to level the playing field in international trade, especially given the large amount of goods the US already trades with the UK.

However, it's important to be realistic about the overall economic impact. While the deal might protect some jobs in the UK and open up new markets for some US products, many economists believe that the immediate economic boost might be relatively small. This is partly because a lot of the trade between the US and the UK is actually in services (things like finance, technology, and consulting), which aren't directly affected by tariffs on goods.

Looking Closer at the Concerns and Criticisms

No big agreement comes without its share of worries, and this new US-UK trade deal is no exception. Here are some of the main points of concern that I’ve been following:

  • The Scope Feels Limited: One of the most common criticisms is that the deal doesn’t go far enough. Many tariffs, including the 10% baseline tariff the US has on most imported goods, remain in place. Some experts argue that this means the deal doesn't really address the core issues that make trade expensive between the two countries. It's like fixing a leaky faucet while ignoring the bigger problem of a damaged roof.
  • Food Safety Debates Are Brewing: The issue of food safety standards, particularly around US beef, has definitely stirred up some debate. There are concerns in the UK that allowing more US beef into the market, especially if it’s produced using different standards (like the use of hormones), could put British farmers at a disadvantage and potentially lower food safety standards for consumers. Even though there have been assurances that UK standards will be maintained, the worry about competition from potentially cheaper, lower-standard products is still there.
  • Unease Among US Automakers: Interestingly, some car companies in the US are not entirely happy with this deal. They’re worried that by reducing tariffs on cars coming from the UK, it might give UK car manufacturers an edge over those in North America who operate under different trade agreements (like those with Canada and Mexico). The concern is that this could disrupt the existing trade dynamics within North America.
  • Overall Economic Uncertainty: While the deal is seen as a positive step by some, there's still a lot of broader economic uncertainty around the world. Even the Governor of the Bank of England has pointed out that while this deal is welcome, more comprehensive trade agreements might be needed to really counter the global economic headwinds. Some economists also note that the UK's economic growth forecast isn't particularly strong right now, and domestic issues like tax changes might have a bigger impact than this trade deal in the short term.

What Does This Mean for the Bigger Picture?

From my perspective, this new US-UK trade deal is a significant event, but it’s also important to see it in the context of the broader global trade landscape.

For the UK, this deal is one piece of a larger puzzle as it tries to redefine its trade relationships after Brexit. They’ve also been working on deals with other countries, like India. However, it’s clear that the European Union remains their biggest trading partner by far. So, while deals with countries like the US are important, progress in its relationship with the EU is likely to have a much more substantial impact on the UK economy.

For the US, this deal is an interesting test of its current trade strategy, which has involved using tariffs more assertively. They’re also looking into trade practices in other sectors, like pharmaceuticals, which suggests that more trade negotiations could be on the horizon.

What I find particularly noteworthy is the emphasis on things like supply chain resilience and digital trade in this agreement. This reflects the changing priorities in international commerce, where it’s not just about the physical movement of goods anymore. However, the fact that some key issues, like food standards and those remaining tariffs, weren’t fully resolved suggests that this deal might be more of a starting point for future discussions rather than a comprehensive free trade agreement.

In Conclusion: A Bridge Built, But More Work Ahead

The new US-UK trade deal announced in May 2025 is undoubtedly a step towards closer economic ties between the two major global players. It brings tangible benefits, like lower tariffs on certain goods and increased market access in specific sectors. For people working in the auto and steel industries in the UK, and for American farmers, this agreement could offer a sense of greater security and new opportunities.

However, it's crucial to acknowledge that this deal isn't a magic bullet. Its limited scope means that many existing trade barriers remain, and concerns about food safety and potential disadvantages for some industries are valid and need to be carefully monitored.

Ultimately, I see this agreement as a pragmatic move – a bridge built between the US and the UK in a complex global economic environment. It lays a foundation for future cooperation, but its true success will depend on how both nations address the existing criticisms and how willing they are to expand their reach in future years. For now, it stands as a testament to the enduring, albeit sometimes complicated, “special relationship” between these two allies.

Capitalize on Global Trade Shifts with Turnkey Real Estate

The recent US-UK trade agreement is reshaping international markets. Investors are seeking stable, cash-flowing assets to navigate these changes.

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Filed Under: Economy, Stock Market Tagged With: Economic Forecast, Economy, Tariffs, Trade

Federal Reserve Keeps Interest Rate Unchanged in May 2025

May 7, 2025 by Marco Santarelli

Federal Reserve Keeps Interest Rate Unchanged in May 2025

On May 7, 2025, the Federal Reserve decided to keep the key interest rate unchanged, maintaining it within the target range of 4.25% to 4.5%. This decision, while seemingly straightforward, sends ripples throughout our financial world, impacting everything from the cost of borrowing for a new car to the potential for businesses to expand and create jobs.

This move by the Fed isn't entirely surprising, especially when you consider the tricky situation we're in. We're seeing an economy that's still showing signs of decent growth and a job market that, while cooling a bit, remains fairly strong. However, the elephant in the room is still inflation, which, despite some easing, remains “somewhat elevated,” as the Fed itself acknowledged.

Federal Reserve Keeps Interest Rate Unchanged in May 2025

Why the Hold? Navigating a Tightrope Walk

In my opinion, the Fed's decision to hold rates steady is a testament to the delicate balancing act they're trying to perform. They're walking a tightrope between taming inflation and avoiding a sharp economic downturn that could lead to higher unemployment. Think of it like trying to adjust the temperature in a room – you don't want to overshoot and make it too cold, just like the Fed doesn't want to raise rates too aggressively and trigger a recession.

Here are some key factors I believe contributed to this decision:

  • Persistent Inflation: While inflation has come down from its peak, it's still above the Fed's comfort zone. They need more convincing data that price increases are consistently trending downwards before they consider lowering borrowing costs.
  • Resilient Labor Market: The job market, despite some moderation, continues to be a source of strength in the economy. Strong employment can put upward pressure on wages and, consequently, prices. The Fed is likely waiting for more significant signs of cooling in the labor market.
  • Uncertainty from Trade: The Fed specifically noted that volatile trade activity is affecting the economic data they rely on. This is a clear nod to the ongoing impact of tariffs, particularly those imposed on China. It creates a layer of uncertainty that makes it harder to predict future price movements and economic growth.
  • Stagflation Concerns: The term stagflation – a nasty combination of slow economic growth and high inflation – was even highlighted by some analysts following the Fed's statement. While Fed Chair Jerome Powell didn't explicitly say they expect stagflation, the fact that the risk of both higher unemployment and higher inflation has increased is a serious concern.

The Impact on Your Wallet and the Wider Economy

So, what does this decision mean for you and the overall economy? Here’s how I see it playing out:

  • Borrowing Costs Remain Elevated: For now, the cost of borrowing money for things like auto loans, credit cards, and personal loans will likely remain at their current, higher levels. This means you'll continue to pay more interest when you take out a loan.
  • Mortgage Rates in Limbo: While home mortgage rates aren't directly tied to the federal funds rate, they are influenced by government borrowing costs, which have also remained high. So, don't expect any significant drop in mortgage rates in the immediate future.
  • Savings Rates: On the brighter side, higher interest rates generally mean you can earn more on your savings accounts and fixed-income investments.
  • Business Investment: Businesses might be more cautious about investing in new projects due to the higher cost of borrowing, potentially slowing down economic growth.
  • Stock Market Volatility: The stock market is likely to remain sensitive to any news suggesting a potential shift in the Fed's stance. Uncertainty about the future path of interest rates can lead to market fluctuations.

Looking Ahead: What's Next for Interest Rates?

Predicting the future is always tricky, but based on the current economic data and the Fed's cautious tone, I believe they will likely continue to hold interest rates steady in the near term, perhaps through their next meeting in June 2025, as some analysts predict.

The big question is when, and if, the Fed will start to cut rates. In my view, this will largely depend on:

  • Clear and Consistent Decline in Inflation: The Fed needs to see more concrete evidence that inflation is sustainably moving towards their 2% target.
  • Cooling Labor Market: A more significant slowdown in job growth and potentially an increase in the unemployment rate could give the Fed more confidence to lower rates.
  • Resolution of Trade Uncertainties: Less volatility in trade and a clearer picture of the impact of tariffs would reduce some of the economic uncertainty.

Differing Perspectives and the Tariff Wildcard

It's important to remember that not everyone at the Fed agrees on the best course of action. Some officials might be more inclined to start cutting rates sooner, especially if they believe that the price pressures from tariffs will be temporary.

Adding another layer of complexity is the stance of the Trump administration on tariffs. As we saw just before the Fed's announcement, there's no indication that these tariffs will be rolled back anytime soon. This creates a unique challenge for the Fed, as tariffs can lead to higher prices for consumers and businesses, potentially fueling inflation. Fed Chair Powell himself acknowledged that the inflationary impact of tariffs could be either short-lived or long-lasting, depending on their extent and duration.

The Crucial Role of Consumer Spending

One of the most important factors keeping the economy afloat right now is the resilience of American consumers. Despite higher prices and borrowing costs, people are still spending. As one market strategist pointed out, even as big institutional investors might be selling, individual retail investors have been net buyers of stocks for a record number of weeks. This suggests a fundamental belief in the long-term prospects of the market and a willingness to keep their money invested. This continued consumer demand is a key factor the Fed will be watching closely.

My Takeaway: Patience and Vigilance

In my expert opinion, the Federal Reserve is right to be patient at this juncture. Rushing to cut interest rates prematurely could risk reigniting inflationary pressures, which would ultimately be more damaging to the economy in the long run. Conversely, raising rates too aggressively could stifle economic growth and lead to unnecessary job losses.

The current situation demands a data-dependent approach. The Fed needs to carefully monitor inflation, the labor market, and the impact of trade policies before making any significant moves. As an observer of the economic scene, I anticipate a period of continued vigilance and careful deliberation from the central bank. The path forward is uncertain, but the Fed's commitment to both price stability and maximum employment will guide their decisions in the months to come.

“Turnkey Real Estate Investing With Norada”

With the Fed decision looming, investors are seeking stability and strong returns from real assets.

Norada offers carefully selected, cash-flowing investment properties—perfect for navigating uncertain markets.

Over “100” HOT NEW LISTINGS JUST ADDED!

Talk to a Norada investment counselor today (No Obligation):

(800) 611-3060

Get Started Now 

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Filed Under: Economy, Financing, Mortgage Tagged With: Economy, Fed, Federal Reserve, Interest Rate, mortgage

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