The halfway point of 2025 is today at noon, which marks 182.5 days into the 365-day year. The benchmark S&P 500 is up 5.4% so far, even after taking a Greg Louganis-worthy 19% dive in April following President Donald Trump’s “Liberation Day” tariff announcement.
Federal Reserve officials, meanwhile, have held off on interest rate cuts — to Trump’s everlasting chagrin. On Tuesday, Federal Reserve Chair Jerome Powell gave his most forceful statement yet blaming the tariffs for the hold-up, but he also left some wiggle room for the next 182.5 days.
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The S&P 500 notched its first record high in more than four months on Friday. It marked an encouraging sign that markets are no longer especially concerned with the worst-case scenarios initially imagined when Trump announced he would rain tariffs on trading partners. The effective US tariff rate, based on policies announced this year, is now 13%, up from 3% at the start of the year, according to Goldman Sachs. Nevertheless, it’s a far cry from the tumultuous but mercifully brief days of 145% tariffs on China in April.
Speaking to the European Central Bank forum in Sintra, Portugal, on Tuesday, Powell said, as explicitly as ever, that the trade tumult of 2025 is the reason the Fed hasn’t cut rates: “We went on hold when we saw the size of the tariffs, and essentially all inflation forecasts for the United States went up materially as a consequence of the tariffs.” The Fed has kept its key borrowing rate steady at 4.25% to 4.5% since December, though officials have suggested it could be lowered to 3.5% in the next year if inflation eases. The latest projections from the Fed’s policy-setting Federal Open Market Committee hint at two cuts before the year is out. Tuesday saw economic data that, for better or worse, could encourage intervention:
Core prices rose 2.7% in May, the Commerce Department announced last week, which is slightly above the Fed’s 2% inflation target, a primary concern related to their rate-setting. But Tuesday saw mixed signals from the labor market: The Bureau of Labor Statistics said job openings rose in May by 374,000 to 7.77 million, the most since November, but actual hires fell 112,000 to 5.5 million. Manufacturing, meanwhile, contracted for the fourth month in a row in June, according to the Institute for Supply Management.
In addition to stable inflation, a weakening economy could prompt the Fed to cut rates to stimulate activity, which would, in either case, make borrowing money cheaper for firms. Powell said a “solid majority” of Fed officials believe it “will become appropriate later this year to begin to reduce rates again” and left the door open to taking policy action at any time, stating he “wouldn’t take any meeting off the table or put it directly on the table.”
