Weekly Buzz: Sticky US inflation, rate cuts elsewhere, and your portfolio ✂️

5 minute read

US inflation picked up in June, putting the Federal Reserve (Fed) in a bit of a bind. The White House wants interest rate cuts to boost the economy, but tariffs complicate that. Simply put: the US is caught between trade policy and monetary policy – and markets aren’t exactly thrilled.

What’s going on?

Headline CPI inflation hit 2.7% in June, while core inflation – which excludes food and energy – climbed to 2.9%. Import prices led the way: apparel rose 0.4% while electronics jumped 1.4%. Yale researchers estimate the current tariff regime is adding roughly US$2,800 a year to the average US household’s costs.

Fed Chair Jerome Powell has been blunt, saying the central bank would have cut rates by now if not for tariffs. Instead, it has kept rates steady at 4.25–4.5% for six straight meetings. The Fed’s latest projections show rates easing slowly through 2025–2027.

The picture looks quite different elsewhere. The European Central Bank has already cut rates to 2%, and the Bank of England has started easing despite stubborn inflation. Similar shifts are happening across Asia, as central banks worldwide respond to softer growth and the threat of tariffs.

What this means for you

US yields may stay higher for longer, but that comes with trade-offs: steeper borrowing costs and slower growth – which is exactly why most investors look forward to rate cuts. Meanwhile, cuts in Europe and Asia could mean lower yields in those bond markets.

Diversification makes sense when central banks aren’t moving in sync. A global strategy spanning government and investment-grade corporate bonds across regions can help to lock in still-elevated yields while managing risk. At the same time, equities remain essential for long-term growth, especially in regions where policy easing may lift market sentiment.

For a diversified portfolio that includes strategic bond exposure, explore General Investing.

💡 Investors’ Corner: How to make the most of your cash as yields ease

For more than a decade after the 2008 financial crisis, interest rates hovered near zero. Central banks kept policy rates ultra-low to stimulate growth, which meant savers earned next to nothing. That changed post-COVID. Inflation surged, and central banks hiked rates aggressively to bring it under control.

Now, with central banks starting up their rate-cutting campaigns again, yields are coming down from their peaks. That makes it a good time to rethink how you manage your cash.

Today’s money market funds and short-term bonds offer a more rational middle ground – letting you keep your money liquid while still earning meaningful yields. Even with rates easing, returns on short-term instruments remain far better than what was available in the decade following the Global Financial Crisis.

Yet it’s worth remembering: cash is a parking space, not a destination. The goal is to have enough set aside for life’s curveballs, but not so much that it slows you down. A smart approach is to match each dollar to its job: keep emergency funds within easy reach, use bonds for short- and medium-term goals, and invest in a globally diversified portfolio to capture long-term growth.

Want your idle cash to do more without locking it up? Check out USD Cash Yield.

These articles were written in collaboration with Finimize.

🎓 Simply Finance: Bond yield

A bond yield is how much you earn from holding a bond – like interest on a savings account. Most bonds pay a fixed yearly amount, called a coupon, but your yield depends on what you paid for it.

For example, if a bond pays $40 a year and costs $1,000, that’s a 4% yield. If the price drops to $950 and it still pays $40 (plus $1,000 back at maturity), you’re earning more on every dollar invested. That’s why yields rise when bond prices fall, and fall when prices rise.