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The U.S. budget deficit widened by 19% in July to $291 billion, despite a significant $21 billion increase in customs duties from President Trump’s tariffs, as reported by the Treasury Department. Receipts rose modestly by 2% to $338 billion, while outlays soared 10% to a record $630 billion. Over the first 10 months of the fiscal year, the deficit grew 7% to $1.629 trillion, with customs duties surging 116% to $135.7 billion. However, these gains were offset by rising costs, including a 10% increase in healthcare spending to $1.557 trillion and a 9% rise in Social Security expenses to $1.368 trillion. Interest on public debt also climbed 6% to over $1.01 trillion due to higher rates and debt levels. While Trump has highlighted tariff revenues, critics note that these costs are often passed to consumers via higher prices, though recent consumer price data showed mixed impacts. Experts suggest future tariff revenue growth is uncertain, with some firms delaying duty payments by storing goods in bonded warehouses, potentially leading to a temporary surge in collections if negotiations fail to lower rates.
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Federal Reserve Chair Jerome Powell’s upcoming speech at Jackson Hole is highly anticipated as investors seek clues about a potential interest rate cut next month. Beyond short-term policy signals, Powell is expected to unveil major revisions to the Fed’s policy framework, which guides its dual mandate of stable prices and maximum employment. A key change likely involves abandoning average inflation targeting—a pre-pandemic strategy allowing inflation to exceed 2% to offset past shortfalls—due to recent inflation surges and their impact on consumer sentiment. Instead, the Fed may adopt a strict 2% target. Critics, including economists and hedge fund leaders, argue that the 2020 framework contributed to delayed rate hikes during post-pandemic inflation, necessitating a more proactive approach. Powell’s speech may also address supply shocks, inflation volatility, and enhanced communication, potentially updating the Fed’s economic projections like the “dot plot.” These changes, part of a five-year policy review cycle, could shape monetary policy for years beyond Powell’s tenure, which ends in May next year, cementing his legacy at the central bank.
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Intel (INTC) saw a nearly 7% stock increase following SoftBank Group's $2 billion investment announcement, alongside reports of the Trump administration potentially converting $10.9 billion in CHIPS Act grants into an equity stake to support Intel’s US manufacturing. Once an industry leader, Intel is grappling with severe challenges, including cash-bleeding manufacturing operations, loss of market share to rivals like AMD and Nvidia, especially in AI chips, and a market cap drop to $111 billion from over twice that in 2021. Under new CEO Lip-Bu Tan, the company has cut 15% of its workforce and delayed European plant expansions. Despite its Foundry business struggles and delays in new technology rollouts like the 18A node, Intel remains geopolitically significant as the only major US-based advanced chip manufacturer. However, analysts express doubt over whether these investments will suffice, with some estimating a need for up to $40 billion for next-gen tech. While short-term government involvement could position Intel favorably, long-term entanglement risks inefficiencies and stifled innovation, prompting hopes for eventual government divestment if Intel regains stability.
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When the Federal Reserve cut interest rates last fall, mortgage rates unexpectedly increased, and a similar pattern might emerge with anticipated cuts in September. Currently at 6.58%, the lowest since October 2024, mortgage rates already reflect market expectations of Fed actions, as per CME FedWatch’s 85% probability of a cut. Unlike debt tied to the prime rate, mortgage rates are driven by 10-year Treasury yields and other market factors like inflation expectations and bond demand, making their response to Fed moves indirect and unpredictable. Upcoming economic data on hiring and inflation could cause rate swings before the Fed’s September 16-17 meeting. Mortgage professionals express frustration as clients delay decisions, hoping for further drops, often missing out on savings. Experts like Chen Zhao from Redfin warn that waiting might be futile amid expected volatility, while loan officers advise focusing on affordability rather than timing the market. With rates having peaked over 7% in May, buyers now have more purchasing power, yet the unpredictability of rates remains a key challenge, as highlighted by industry voices who stress there’s no “crystal ball” for forecasting rate movements.
