by Louis Navellier
June 24, 2025
There were a lot of central bank key interest rate cuts recently, including eight straight cuts by the European Central Bank (ECB); and worldwide bond yields will likely meander lower as the escalation of war in the Middle East spreads to the U.S. and other nations. In the midst of this new war and stubbornly low inflation readings, the Federal Open Market Committee (FOMC) statement on Wednesday was dovish, as I anticipated. The FOMC said, “Uncertainty about the economic outlook has diminished but remains elevated. The Committee is attentive to the risks to both sides of its dual mandate.”
Additionally, a new FOMC “dot plot” forecasted just two potential 0.25% key interest rate cuts this year, as seven FOMC members expected zero rate cuts in 2025, so there remain some stubborn hawks on the 19-person FOMC board. Unfortunately, Fed Chairman Jerome Powell, during his press conference, remained adamant that tariffs would be inflationary, so the stock market sold off during his press conference.
The next FOMC meeting will be held on July 29th and 30th. Fed Governor Christopher Waller said the FOMC may lower interest rates at that July FOMC meeting. In a CNBC interview, Waller said, “We could do this as early as July,” adding, “I think we’ve got room to bring it down, and then we can kind of see what happens with inflation.” Waller also said, “We’ve been on pause for six months to wait and see, and so far, the data has been fine.” Meanwhile, President Trump is still demanding that the Fed cut key interest rates. He remains furious with Fed Chairman Jerome Powell, saying that a 2% cut of the Fed funds rate could save the federal government $600 billion a year in interest costs on the federal debt.
Meanwhile, many U.S. economic indicators are deteriorating, giving the Fed more reasons to cut interest rates. The Commerce Department announced that retail sales declined 0.9% in May and June’s sales were revised lower to a 0.1% decline (from a previously reported 0.1% gain). This is the first time retail sales have declined for two consecutive months since late 2023. Seven of the 13 retail sales categories surveyed declined in May, led by building materials, gasoline and vehicle sales. Specifically, building materials and garden stores sales plunged 2.7%, gasoline station sales fell 2%, due mostly to lower fuel prices, and vehicles sales declined by a whopping 3.5%. Also, sales at bars and restaurants declined 0.9% in May. The only silver lining was– excluding building materials, gasoline and vehicle sales – core retail sales in May rose by 0.4%. Treasury yields declined in the wake of this May retail sales report.
New housing starts declined 9.8% in May to a 1.26 million annual rate, which is a 5-year low (the worst since May 2020). There is no doubt that high mortgage rates continue to squelch home sales. The Northeast saw the sharpest decline with a 40% drop, while housing starts rose 15% in the West. Building permits for single family homes declined 2.7%, while multi-family housing permits rose by 1.4%.
Despite all of this weak economic news, and all the uncertainty resulting from the U.S. joining Israel in bombing Iran’s major nuclear facilities, the Atlanta Fed is still estimating 3.4% annual GDP growth for the second quarter. Higher energy costs are expecting to significantly boost U.S. exports, and imports will remain low until all of the major tariff deals are finalized, so trade imbalances are keeping GDP estimates high.
Overseas, Britain’s office for National Statistics on Friday announced that retail sales plunged 2.7% in May after four consecutive months of improving retail sales. This is a big decline that will likely re-ignite talk of recession, causing the Bank of England to continue to cut key interest rates. Collapsing interest rates around the world should also cause U.S. Treasury yields to decline and coax the Fed to cut rates.
Statistics Canada also announced on Friday that retail sales declined 1.1% in May, the largest monthly decline this year. The Canadian economy is expected to stall or contract in the second quarter, as tariff “front-running” activity has faded. Consumer spending has been weak this year, so Canada needs to generate GDP growth via exports – predominately to the U.S. As a result of trade tensions, Canada is expected to slip into a recession and the Bank of Canada is expected to continue cutting key interest rates.
All content above represents the opinion of Louis Navellier of Navellier & Associates, Inc.
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Louis Navellier
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Louis Navellier is Founder, Chairman of the Board, Chief Investment Officer and Chief Compliance Officer of Navellier & Associates, Inc., located in Reno, Nevada. With decades of experience translating what had been purely academic techniques into real market applications, he believes that disciplined, quantitative analysis can select stocks that will significantly outperform the overall market. All content in this “A Look Ahead” section of Market Mail represents the opinion of Louis Navellier of Navellier & Associates, Inc.
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