Today's Scoop:

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Here’s what you need to know…

1. Interest rates are going up again.

2. Policymakers aren’t expecting a recession anymore.

3. High mortgage rates have slowed home buying.

S&P 500: 4,566.75
1Mo: +4% | 1Yr: +14% | 5Yr: +62%

The market stayed flat today amidst mixed corporate financial reports and an unsurprising policy announcement from the Federal Reserve.

Interest rates are going up. The Federal Reserve raised baseline interest rates by 0.25% to 5.25%, continuing the most extreme policy in decades aimed at slowing the economy and reducing inflation. [🤓] This will make savings accounts pay more, but also make debt more expensive - credit cards, auto loans, mortgages, etc.

Policymakers aren't expecting a recession anymore. The Federal Reserve said there's a good chance this will be the last interest rate increase, signaling confidence that they've done enough to cool inflation. After forecasting a mild recession for a while now, economists at the Fed think we should be able to avoid one.

Expensive mortgage rates have deterred home buyers. The Mortgage Bankers Association reported applications to purchase a home fell 3% last week, down 23% from a year ago. The average 30-year fixed-rate mortgage sits at about 6.9%. The Commerce Department said there were 2.5% fewer homes sold in June than in May. Low supply in the market has kept prices from falling much.

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• UPS averted a global crisis and massive strike with huge pay bumps

• Snapchat’s turnaround continues, but sales still lag

• TotalEnergies invests big in more renewables

• Google’s business reaccelerates

• Microsoft keeps growing slowly

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The Federal Reserve & Interest Rates

The Federal Reserve, aka the Central Bank, aka The Fed, is in charge of our whole money system. When the economy is struggling, the Fed lowers baseline interest rates to make it cheaper for consumers and businesses to borrow and spend (lower rates on business loans, mortgages, credit cards, car leases, etc.), encouraging more business.

The Fed also pumps more money into the system by buying bonds with new dollars that it essentially speaks into existence. The additional cash keeps the pipes flowing as the borrowing and spending heats up, stimulating economic activity.

Once the economy's strong enough to stand on its own, the Fed starts to raise interest rates and pull back some of that money to ensure the economy doesn't overheat. Inflation is the Fed's heat gauge. The gauge was reading very hot but has been cooling lately.

So everyone's watching how long the Fed will keep restricting the economy with high rates if inflation keeps cooling. The Fed hopes to get living costs under control without sparking mass unemployment.

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