Fed Watch – 5/30/2025

The below transcript is a literal translation of the podcast audio that has been machine generated by Notta.

Hello, I’m Brian Beaulieu, Chief Economist, for now, of ITR Economics. Thanks for joining us for this edition of Fed Watch.

The data that came out this week really leads me to one conclusion. Some that says the Fed could lower interest rates if they want to lower the Fed funds rates. Certainly the very favorable inflation report this week gives them some latitude to do that. But the preponderance of input, despite media frenzy and relying on dubious data, like consumer expectation, shows that the consumers out there spending GDP is growing. Some sectors like housing remain weak, but overall disposable personal income is rising. In fact, they picked up speed a little bit, and personal consumption expenditures accelerated a little bit also.

And furthering the good news is we had the US government 10-year bond yield drop 10.3 basis points, which was a nice change from what we’ve been seeing over the last four weeks. And the 30-year fixed rate mortgage was up only three basis points from last week, so it’s really not worth talking about.

So the consumers out there buying. The Redbook weekly data that went through last week in May, actually improved to 6.1% from the previous week where it was at 5.4%. So that’s a nice tick up. And I wanted to see the data hold up for May, and it is. And I was the one a month ago that was saying personal income is growing too slowly, we need to see it improve. And that disposable personal income did improve. It improved from a 1.5% year-over-year growth rate to a 2.2% growth rate. And I looked a little bit deeper into the numbers in that 12 month moving average data trend rise that’s been going on, and by the way, that 12 month moving average is at a record high, the slope of the rising trend is the steepest we’ve seen in 47 years. So it’s not just a little dinky rising trend. This is a real rising trend going on in disposable personal income. And I’m taking some solace that the year-over-year comparison has improved.

Consumers out there spending is what the data is showing. They’re getting the income to spend even more. The world of confusion continues out there, but we’re also looking at a weekly financial stress indicator. And that’s showing that, while there’s a lot of consternation about tariffs, it seems to be limited to businesses uncertainty about what to expect, rather than the consumers out there actually spending money.

It’s all good, folks. Sorry if you really were looking for reasons for interest rates to go down on, compliments at the Federal Reserve, we just aren’t seeing it. We’re going to get new GDP data out from the government by the end of July. That’s quite a ways away. In the meantime, we’ll continue to watch the weekly data. And it’s telling us, exhale, relax, and focus on making customers happy, satisfying their needs even when it’s unevenly distributed across the calendar.

It’s all we can do right now, folks, is focus on the customer, what we do best, and keeping them happy. Thank you for watching this edition of Fed Watch, and we’ll see you next week.