Fed Holds Rates Steady
The Federal Reserve held interest rates steady amid economic uncertainty tied to the Trump administration’s trade policies and potential risks of both inflation and higher unemployment. Fed Chair Jerome Powell acknowledged that while the economy remains solid overall, the effects of tariffs could lead to a stagflationary environment. Despite some volatility in markets, stocks recovered after the announcement, although analysts warned of negative implications for risk assets. With no immediate plans for a rate cut, the Fed is taking a cautious approach as it monitors ongoing trade negotiations and their impact on growth and inflation.
Mortgage Demand Sees Unexpected Surge
Mortgage interest rates fell slightly for the second consecutive week due to negative economic news, including weak GDP growth and manufacturing contraction. Despite the modest drop in rates, mortgage demand jumped 11%, with both home purchase and refinance applications seeing significant gains. The surge in purchase applications was largely driven by conventional loans, typically used by move-up buyers, while VA loans fueled a sharp rise in refinance activity. Although mortgage rates have remained steady this week, upcoming comments from the Federal Reserve could influence future rate movements.
China – U.S. Tariffs Paused
The United States and China announced a deal to reduce reciprocal tariffs and pause further trade measures for 90 days to ease tensions in their ongoing trade war. U.S. Treasury Secretary Scott Bessent said tariffs would drop by over 100 percentage points to 10%, following productive talks in Geneva. This marks the first high-level meeting since President Trump’s return to office, which came after a series of tariff hikes and retaliatory actions that severely disrupted global trade. The news lifted financial markets, with hopes rising that the agreement could help prevent a global recession.
