Today's Scoop:

Hey friends, hope you enjoyed the holiday. How was the first day back?

Here’s what you need to know today…

1. Policymakers are still ready to restrict the economy further.

2. US manufacturing may be in a recession.

3. Businesses have cut back on big spending.

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The market didn't move much today amidst a short holiday week with fewer traders in the office.

Policymakers are still ready to raise interest rates further if inflation makes a comeback. Minutes released from the June Federal Reserve meeting confirmed many of the policymakers’ recent comments indicating higher rates may be coming. They’re ready to raise interest rates and restrict the economy further if inflation doesn’t keep trending lower. Investors place an 80% likelihood of a 0.25% increase in baseline interest rates, making loans, credit cards, and mortgages more expensive. [🤓]

US manufacturing might be in a recession of its own. The Commerce Department said factory orders for American-made goods rose only 0.3% in May, less than half of what economists expected. The Institute for Supply Management's manufacturing index has been in contraction for eight months, the longest stretch since the ‘08 crisis. Factories are receiving fewer orders from retailers trying to clean up their inventories, and budget-conscious consumers shifting spending from stuff to services like travel and restaurants.

Businesses have been cutting back big spending too. The Commerce Department reported businesses had purchased less equipment for two straight quarters; the first tthat'sat’s happened since 2020.

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How the Federal Reserve Works

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.)

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 econdoesn'tsn't overheat. Inflation is the Fed's heat gauge. The gauge was reading very hot but had been cooling lately. 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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