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Even a rate cut cannot save Americans? Consumer pressure index soars to the peak of the epidemic, recession alarm sounds
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Hello everyone, today XM Forex will bring you "[XM Forex Market Review]: Even interest rate cuts cannot save Americans? The consumer pressure index soars to the peak of the epidemic, and the recession alarm sounds." Hope it will be helpful to you! The original content is as follows:
This round of interest rate hikes in the United States began in March 2022, when the inflation situation was severe and the Federal Reserve started the process of fighting inflation rate hikes. Since March 2022, the Federal Reserve has carried out many aggressive interest rate hikes, with the highest cumulative interest rate hikes reaching 525 basis points, raising the target range of the federal funds rate from 0.25%-0.5% to 5.25%-5.5%. The rapid and large rate hike rate is rare in history. As of July 2025, the interest rate remained between 4.25% and 4.50%.
People's financial pressure has risen to its high since the epidemic
Although Wall Street promotes economic resilience and stock market ups, ordinary Americans are in financial difficulties. According to data from the US legal consulting firm Legal Shield, the Consumer Pressure Legal Shield, in the second quarter, the Consumer Pressure Legal Index (CSLI) rose 4.4%; the foreclosure index jumped 13.3%, up nearly 28.9% from the same period last year. The higher the index indicates that the more houses are being recovered by banks and other lenders due to defaults by borrowers, the largest annual growth rate in three years; the volume of consumer finance consulting surged by 8.7%, and the index has risen to the highest level since the epidemic shutdown in November 2020, reflecting the problems of foreclosures and mortgage payments caused by rising debts. New York Fed data shows that household debt rose by $167 billion in the first quarter of 2025, and LegalShield executives said its data was a leading indicator, indicating a sharp rise in consumer debt.
Multiple factors cause no hope of stress relief
Unlike the epidemic period in 2020, the current financial pressure lacks signs of reversal. The Fed's interest rate cuts and politicsThe government has stimulated checks to quickly relieve stress, and now the huge funding bill has little effect. Even if interest rates may be cut in September, it will be difficult to become a panacea. Credit tools such as "buy first and pay later" have exacerbated family pressure, and the Trump administration's global trade war and import tariffs have pushed up inflation, further worsening consumer situations. Although Trump proposed to consider using tariff revenue to issue tax refunds, there is no official stimulus plan yet and financial pressure continues to intensify. ?
The economic outlook casts a shadow of uncertainty
The severe challenges faced by consumers have heated up economic concerns, and uncertainty may continue. Rising inflation is expected to lead to a decrease in consumption and a slowdown in economic activity, creating a stagflation environment, which is beneficial to gold. Market analysts believe that the inflationary pressure brought by Trump's trade policy, coupled with high consumer debt, will make the economic outlook full of variables. Despite expectations of interest rate cuts and tax refunds, it is difficult to solve the current financial difficulties of consumers and the risk of slowing economic activities is still increasing.
After the passage of the "Big and American" bill, the US debt dilemma intensified.
The U.S. Treasury Department significantly raised its quarterly borrowing estimates to supplement its cash reserves. Due to the impact of debt ceilings, the U.S. Treasury Department significantly raised its federal borrowing estimates this quarter to $1 trillion. The U.S. Treasury Department issued a statement on Monday (July 28) saying that it expects net borrowing to be $1.01 trillion from July to September, up from the $554 billion forecast in April. In the first half of the year, the Treasury Department is speeding up issuance to rebuild cash reserves to avoid hitting the debt ceiling. By customary, the Ministry of Finance estimates in April did not consider the debt ceiling factor, when it assumed that the cash balance at the end of June was $850 billion, which was actually only $457 billion. The Ministry of Finance said that without considering the lower-than-expected cash balance at the beginning of the quarter, borrowing estimates for the quarter are $60 billion higher than the amount announced in April.
The big and US bill may push up inflation
The big and US bill reduces benefits, and Medicaids, food stamps, etc. shrinks, exacerbating the burden on the people. Its tilts traditional energy and cancels new energy credits may cause electricity prices to jump in 2027. The US tariff policy pushes up the prices of imported goods. Although it gives service industry practitioners tax exemptions, it is difficult to offset the impact of energy and food price increases. The bill will also add a large number of new deficits, and the burden will be passed on to taxpayers.
Trump urges to cut interest rates, and the Federal Reserve Chairman is about to change its term
U.S. Treasury Secretary Bescent Monday (7 On the 28th of the month, the White House will begin interviewing the candidate for the next Fed Chairman this fall, and the current chairman Jerome Powell's term will end in May 2026. Trump's demand for the Fed's interest rate cut is very urgent, mainly due to the severe debt situation in the United States. After the "Big and US" bill is passed, it is expected that about $3.3 trillion of new federal debt will be added in the next 10 years. If the interest expenditure is included in the scale of larger US Treasury bonds, the scale of US Treasury bonds has reached $36.2 trillion. Under the current high interest rate environment, the total interest cost of US government debt in the first nine months of fiscal year 2025 has reached 92$1 billion. Trump hopes to reduce interest expenses on government debt through interest rate cuts and alleviate heavy debt repayment pressure. At the same time, the tariff policies it implemented have pushed up inflation and aggravated the risk of economic recession. Rate cuts can "offset" the inflation brought by tariff policies to a certain extent, alleviate the risk of economic recession, prevent the economic situation from further deteriorating, and stabilize its own support rate.
There are opportunities for bond investment
Even though Moody's adjusted the US bond rating from Aaa to Aa1, US bonds are safe and stable, endorsed by the US government's credit, and have both breadth and depth in the Treasury bond market. In the past, it performed well in the market during the market turmoil, and was still generally considered a safe asset by the market.
In the context of the "Big and American" bill exacerbating the U.S. debt dilemma, current bond investments can focus on the opportunities brought by interest rate cuts. If interest rate cuts as scheduled in September, it will reduce the pressure on the US government to repay debts and also cause the prices of issued bonds to rise rapidly.
For investors, applying for bonds at this time can lock in higher face-to-face returns, and with possible interest rate cuts in the future, bond prices will rise and gain considerable capital gains, which is a more worthy investment choice.
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