Yes—and the evidence is mounting. Durable goods just showed a dip, which is a classic red flag for slowing business confidence. Companies don’t cut back on buying heavy equipment and machinery unless they’re concerned about the future. That should be enough to nudge the Fed toward easing.
But Jerome Powell seems more intent on preserving his reputation as an “inflation hawk” than responding to the real economic pressures on small businesses, families, and investors. A modest quarter-point cut wouldn’t be reckless; it would be common sense.
By dragging his feet, Powell risks forcing the economy into unnecessary stagnation. Washington may call the economy “resilient,” but declining durable goods tell another story. If the Fed refuses to adjust, today’s tremors could become tomorrow’s shockwaves.
The Congressional Budget Office (CBO) uses a combination of economic models, historical data, and policy assumptions to project the effects of tariffs. First, the CBO examines how tariffs directly increase federal revenue through the duties collected on imported goods. It then incorporates behavioral responses, such as changes in trade patterns, consumer demand, and business supply chains, since higher import costs often lead to reduced trade volumes.
The agency also accounts for the secondary effects of tariffs. These include higher consumer prices, potential shifts in domestic production, and slower economic growth if businesses face higher input costs. All of these factors are run through macroeconomic models to estimate the broader impact on GDP, employment, and inflation.
Finally, the CBO compares these outcomes against baseline projections without tariffs to determine the net effect on federal revenue, the deficit, and the overall economy. Importantly, the CBO emphasizes uncertainty in its forecasts — real-world outcomes depend on how businesses, consumers, and trade partners adapt to tariff policies.
The Leading Economic Index (LEI) is often treated as a snapshot of where the economy may be headed. For conservative investors, though, the LEI isn’t a signal to make sudden, sweeping changes. Instead, it’s a tool for perspective.
When the LEI is rising, it often reflects growing confidence in business activity, consumer demand, and overall momentum. In this environment, conservative investors can feel reassured about maintaining steady equity exposure while still relying on their defensive positions for balance.
When the LEI declines, however, it doesn’t necessarily mean panic. A dip in the index may point toward slowing growth, but for the cautious investor, this can be a reminder to:
Review portfolio balance: Ensure that allocations between stocks, bonds, and cash align with long-term goals.
Check income streams: Focus on dividend-paying companies or interest-bearing assets that continue to provide stability during slower growth.
Confirm diversification: Avoid being overly reliant on one sector that could be more exposed to downturns.
The key insight is that the LEI is most useful as context, not command. Conservative investing is built on patience, discipline, and protecting capital across cycles. The index can help guide expectations, but the core strategy — emphasizing quality assets, defensive positioning, and long-term goals — remains the anchor.
In short: the LEI can sharpen awareness of where the economy might be going, but it shouldn’t replace a conservative investor’s steady hand.
As Federal Reserve Chairman Jerome Powell continues to hold interest rates steady at 4.25% to 4.5%, many are left wondering: what is he waiting for? Even a modest quarter-point cut could ease the financial strain on American households and businesses, yet Powell remains steadfast, citing economic uncertainties and the need for more data. From my perspective, this cautious approach risks putting America—and potentially the global economy—in harm’s way.
The U.S. economy, while resilient, is showing signs of strain. Inflation, though down from its 2022 peak of over 9%, remains above the Fed’s 2% target, with core PCE inflation hovering around 2.8% as of February 2025. Unemployment, at 4.2%, is still low by historical standards, but recent data suggests a cooling labor market, with job growth slowing to an average of 150,000 jobs per month in early 2025. Consumer confidence is faltering, and businesses are grappling with uncertainty, largely driven by President Trump’s aggressive tariff policies, which Powell himself has acknowledged could push prices higher while slowing growth.
Powell’s reluctance to cut rates stems from his focus on ensuring inflation doesn’t become entrenched. He’s repeatedly emphasized the Fed’s dual mandate—maximum employment and price stability—and warned that premature rate cuts could reignite inflation, especially if tariffs cause persistent price increases rather than a one-time spike. At a recent conference, he noted, “We are well positioned to wait for greater clarity before considering any adjustments to our policy stance.” This wait-and-see approach, while prudent in theory, ignores the mounting pressures on everyday Americans. High borrowing costs for mortgages, auto loans, and credit cards are squeezing households, with 77% of Americans reporting that their incomes aren’t keeping up with inflation.
From my point of view, Powell’s hesitation is unnecessarily rigid. A quarter-point cut could signal confidence in the economy’s resilience while providing relief to consumers and small businesses struggling with elevated borrowing costs. The Fed’s benchmark rate, unchanged since December 2024, is already at a level that gives Powell room to maneuver without risking runaway inflation. Yet, he seems fixated on the potential inflationary impact of tariffs, which he admits are hard to predict. This indecision feels like a gamble with America’s economic health. If the economy slows further—some economists project first-quarter 2025 growth as low as 1%—delaying rate cuts could exacerbate a downturn, potentially pushing unemployment higher and stifling consumer spending.
The global implications are equally concerning. Trump’s tariffs, including 25% duties on steel and aluminum, threaten to disrupt international trade, with the World Trade Organization warning of a potential reversal in global trade growth. Higher U.S. interest rates could strengthen the dollar, making American exports less competitive and putting pressure on emerging markets with dollar-denominated debt. By holding rates steady, Powell risks amplifying these global headwinds, potentially triggering a broader economic slowdown.
Powell’s defenders argue he’s navigating a “challenging scenario” where tariffs could lead to stagflation—high inflation coupled with stagnant growth. They point to his commitment to Fed independence, especially in the face of President Trump’s public demands for immediate rate cuts. But this doesn’t justify inaction. A modest rate reduction could act as a buffer against economic uncertainty without compromising the Fed’s credibility. Instead, Powell’s insistence on waiting for “greater clarity” feels like a refusal to act decisively in a moment that calls for leadership.
From where I stand, Powell’s caution is putting America at risk of a self-inflicted wound. The economy isn’t overheating, and a quarter-point cut wouldn’t unleash runaway inflation. It could, however, ease the burden on families, support small businesses, and signal to the world that the Fed is proactive in supporting growth. The longer Powell waits, the greater the chance that his inaction could tip the U.S.—and the global economy—into avoidable turmoil. It’s time for the Fed to act, even if modestly, before the window for a soft landing closes.
The CPI rose to 2.7% year-over-year in June 2025, up slightly from May’s 2.4%, and this modest climb is the result of a delicate balancing act in the economy. On the one hand, energy prices have cooled significantly, with gasoline down 8.3% and fuel oil down 4.7% from last year, thanks to steadier global supply chains and strong oil exports from allies like Norway. This has helped offset inflationary pressures in other sectors.
Shelter costs, while still rising at 3.8% year-over-year, are showing signs of slowing compared to the rapid increases of 2021–2022, and rent growth is expected to cool further into 2026. Food prices are up 3.0%, with groceries rising 2.4% and restaurant meals up 3.8%—still higher than some would like, but far from the runaway spikes of past years.
Meanwhile, President Trump’s tariffs—including a 25% levy on steel and aluminum and duties on Chinese imports—are having a slow-burn effect, adding roughly 0.3% to inflation as businesses gradually adjust prices. Goods prices, which had been falling in 2023–2024, are now ticking up slightly due to a softer dollar and steady consumer demand, but not enough to trigger a surge.
The Federal Reserve has kept rates steady at 4.25%–4.50%, signaling confidence that inflation is under control. Strong job numbers—unemployment at 4.2% and wage growth around 4–5%—are supporting consumer spending, particularly in services like travel and dining, without creating the overheated conditions that could drive prices sharply higher.
In short, the modest CPI increase is the product of cooling energy markets, easing supply chain pressures, manageable housing and food costs, and steady monetary policy. For investors, this stability means a more predictable environment where defensive sectors and value-focused strategies can thrive without the fear of the double-digit inflation that rattled markets just a few years ago.
The Federal Reserve is walking a tightrope, and the stakes couldn’t be higher. July’s disappointing jobs report—showing only 73,000 new jobs and stagnant wage growth—has raised red flags about the health of the U.S. economy. On one hand, this kind of soft data bolsters the argument for a rate cut as early as September. Lower rates would make borrowing cheaper, helping businesses invest and consumers spend, which could provide the short-term lift markets are craving. For conservative investors, such a move would typically support defensive dividend payers like utilities, consumer staples, and healthcare stocks, while also keeping bond ladders attractive as yields fall.
However, the Fed’s decision isn’t that simple. With the rollout of new tariffs this week, inflation risks are reentering the picture. Tariffs may be designed to strengthen domestic industries over the long term, but in the short term, they raise costs on imported goods—from raw materials like lumber to everyday consumer products. That means higher prices for households and potential margin squeezes for businesses. If the Fed cuts rates too quickly while tariffs push costs higher, they risk stoking inflation just as they attempt to cool economic pressures. It’s a delicate balancing act: stimulate growth without letting prices spiral.
Another factor is consumer confidence. The University of Michigan’s Consumer Sentiment Index, due at the end of this week, will reveal how households are reacting to the one-two punch of weak job creation and looming tariff costs. A sharp decline in sentiment could push the Fed closer to a rate cut, as it would suggest that consumers—who drive nearly 70% of U.S. economic activity—are preparing to tighten their wallets. On the flip side, if sentiment holds firm, the Fed may feel it has the breathing room to hold rates steady a bit longer.
The bond market is already sending strong signals. Yields have drifted lower since the jobs report, reflecting expectations of a Fed move. Yet equity markets remain cautious, waiting to see whether earnings reports confirm that companies can manage cost pressures without cutting into profit margins. Fed officials, too, are carefully parsing this week’s earnings season for signs of tariff fallout and slowing demand before committing to a policy shift.
So, will the Fed lower rates or create more pressure on the economy? The answer likely hinges on a mix of the next jobs report, inflation data, and how tariffs ripple through consumer prices. A September rate cut is very much on the table—but it is not guaranteed. If inflation heats up, the Fed may opt to hold steady, even at the risk of slower growth, to preserve credibility on price stability.
For conservative investors, the strategy is clear: stay balanced and avoid extremes. Defensive dividend stocks, shorter-duration bonds, and sectors less exposed to import costs provide a safe harbor no matter what the Fed decides. If rates fall, we’ll enjoy a lift from income-generating holdings. If the Fed holds steady under tariff pressure, our conservative positioning shields us from the sharper swings riskier assets may face. In times like these, discipline and patience remain our strongest allies.