Reddit sued Anthropic, alleging the Claude chatbot developer unlawfully trained models on Reddit users’ personal data without a license.
The social media platform has content licensing deals with Google and OpenAI.
Shares of Reddit jumped Wednesday after the company filed the complaint.
Reddit (RDDT) filed a lawsuit against AI startup Anthropic, accusing the Claude chatbot developer of unlawfully training its models on Reddit users’ personal data without a license.
Shares of Reddit surged close to 7% Wednesday following the complaint, and have climbed about 28% so far in 2025.
The complaint, filed in California Wednesday, accuses Anthropic of scraping Reddit’s servers more than 100,000 times despite claiming to have blocked its bots from doing so in July 2024.
At issue is Reddit’s user agreement, which bars companies from “commercially exploit[ing]” users’ data without a formal deal with the company. ChatGPT developer OpenAI and Alphabet’s (GOOGL) Google have both agreed to terms with the company to license Reddit data, for example. Reddit’s user agreement includes certain privacy measures, including requiring companies to remove users’ deleted posts from their training systems.
Reddit’s complaint seeks compensatory damages for the value of the content it says Anthropic used to train its models. It also requested an injunction requiring Anthropic to remove “any technology derived from Reddit content,” potentially including the Claude chatbot.
An Anthropic spokesperson told Investopedia, “We disagree with Reddit’s claims and will defend ourselves vigorously.”
Signs of weakness in US economic data have weighed on the dollar, fueling concerns about the rising possibility of a downturn in the second half of the year. Yesterday’s reports point to a slowing economic landscape, with markets increasingly anticipating softer data in the coming months. On one hand, ADP private sector hiring in May came in at just 37K its lowest level since March 2023, signaling weaker job growth momentum.
Meanwhile, the ISM services PMI slipped to 49.9, falling short of the expected 52, with new orders plunging to 46.4 from 52.3 the previous month. This sharp decline is fueling concerns about the broader economic trajectory and the potential for a turning point. The downturn was primarily driven by weaker business activity and new orders, both reaching their lowest levels since the COVID-19 lockdowns in 2020. On the cost front, inflationary pressures intensified as the prices paid index climbed to 68.7, reaching levels last seen during the final stretch of the post-pandemic supply chain disruptions.
Concerns over economic growth are rippling through US Treasuries. With fiscal fears easing for now, the 10-year Treasury yield has dipped below 4.4%, while the 30-year yield has fallen under 5%. As markets ignore US policy noise and the VIX drops below its 10-year average of 18.5, the US dollar is adjusting to softer growth expectations, reflecting lower pricing.
On the tariff front, at a press briefing this week, White House spokesperson Karoline Leavitt said US Trade Representative Jamieson Greer sent a letter to all trade partners as a friendly reminder of the upcoming deadline. Yes, we’re almost one month away from the 90-day tariff truce after reciprocal tariffs were announced. She noted that Greer, along with Treasury Secretary Scott Bessent and Commerce Secretary Howard Lutnick, are actively discussing tariffs with key Washington allies. Although the US Court of International Trade initially blocked the tariffs last week, an Appeals Court overturned the decision, keeping them in place and offering the US administration some relief.
All eyes on the NFP tomorrow. Markets expect the US created 126K jobs during May and the unemployment rate to stay at 4.2%. Softer than expected should be dollar negative and might send the DXY Index to test its 2025 low at 97.9.
Euro attempts to hold above $1.14
Antonio Ruggiero – FX & Macro Strategist
The weaker US data batch of late has helped the euro push into $1.14 territory, holding firm above its 21-day moving average. The rebound was hardly surprising, but markets still place greater weight on the stronger-than-expected NFP data later in the week, which poses a downside risk to EUR/USD.
Beyond softer US data, an undercurrent of bearish sentiment continues to drag on the euro, as lingering US trade negotiations with China and the EU prevent the currency from making a decisive break above $1.14. Every US dollar rebound further weakens investor confidence that the euro could emerge as the world’s new reserve currency, a theory that had been gaining traction in recent months.
Nonetheless, uncertainty remains high, with tensions escalating as key deadlines approach. EU officials fear Trump holds outsized “leverage”, arguably his second-favorite word, trailing only behind ‘tariffs’, given the simultaneous crises of trade negotiations and the war in Ukraine. In just 11 days, Trump will square off with European leaders at the G7 summit in Canada, an event expected to provide clarity—or at least hope—on both the geopolitical and trade fronts. Meanwhile, EU leaders are set to meet in Brussels in less than three weeks to negotiate a trade deal with Trump and avert the looming 50% tariffs, with preliminary discussions already underway in Paris this week.
Despite these tensions, EUR/USD overnight volatility remained subdued, especially compared to the eve of previous European Central Bank (ECB) meetings. Aligning with the broad consensus that tariffs will weigh on EU economic activity, the ECB is almost certain to cut its deposit rate to 2.00% today, with markets pricing 99.7% of a cut today. Adding to the case for a cut, Tuesday’s soft Eurozone inflation prints saw the headline figure break below the 2% target to 1.92%, while core inflation—which strips out volatile food and energy prices—fell from 2.7% to 2.3%, reinforcing concerns about economic momentum.
UK data resilience driving GBP/USD strength
George Vessey – Lead FX & Macro Strategist
Recent UK data has consistently exceeded expectations this year, pushing Citi’s UK economic surprise index to a one-year high. This has helped GBP/USD climb over 8% year-to-date as the pair closely tracks the UK-US economic surprise differential. The six-month correlation coefficient between the two is nearing its highest level in a decade and is more a reflection of strong UK data as opposed to weak US data.
The de-dollarization narrative amidst waning US economic exceptionalism, a ballooning debt pile and erratic US policy is an obvious weight on the dollar, but this strong correlation also suggests GBP/USD could remain supported if UK data continues to surpass forecasts even amid shifting US conditions. However, any deterioration in UK fundamentals, or a sharp rebound in US data, could temper upside potential for the pound, with $1.36 proving to be a key hurdle to overcome.
In terms of UK data though, the final PMI figures for May have been released this week and the composite figure was revised higher than the preliminary to 50.3 in May, up from April’s 48.5, signalling a return to slight growth despite the reading being its second lowest since October 2023. The increase was driven by stronger services output, offsetting deeper contractions in manufacturing.
The services PMI edged up to 50.9, reflecting a fragile recovery as US tariff concerns receded. However, demand remains weak, with new orders declining for the fourth time in five months. Employment has fallen for eight months, though the latest drop was the mildest since late 2024. Price pressures persist, but business confidence rebounded, supported by investment plans and improving economic prospects.
*The FX rates published are provided by Convera’s Market Insights team for research purposes only. The rates have a unique source and may not align to any live exchange rates quoted on other sites. They are not an indication of actual buy/sell rates, or a financial offer.
A criminal record is more than a blemish—it is often a long-term pay cut that can cast a shadow over someone’s entire career. New research and decades of audit studies show that, on average, workers with a record earn about one-third less than their otherwise similar peers, face steeper unemployment spells, and are more likely to be crowded into lower-paying jobs. Studies examining the U.S., including a 2020 report from the Brennan Center, indicate a 52% decline in income for individuals who have served prison time.
And the ranks of people bearing that record keep swelling. Each year, more than 600,000 inmates are released from state and federal correctional facilities and transition back into the economy, with millions more individuals cycling through local jails.
The latest evidence reveals why the 30% haircut persists, who is most affected, and what it costs the broader economy.
Key takeaways
Adults with a criminal record earn about 30% less, on average, than comparable workers without one, even after accounting for age, education, and gender.
In the U.S., annual earnings fall 16% after a misdemeanor conviction, 22% after a non-custodial felony, and a staggering 52% after prison time.
The Hidden Pay Cut for Convicts
The most comprehensive recent evidence comes from a 2025 National Bureau of Economic Research (NBER) research paper that followed working-age adults in Sweden over a period of 25 years. When the researchers compared two nearly-identical groups (people of the same age, education level, and background, but only one group with a criminal charge) they found that having that charge alone knocked paychecks down by about 5% each year, and that’s before counting the much larger 31% wage gap seen when they compared everyone with a record to everyone without one.
The hit, moreover, is not just a brief post-arrest dip: it sticks and doesn’t simply disappear when the record is cleared.
U.S. studies show a similar pattern. The Brennan Center analysis calculated lifetime losses of around $484,000 in lost lifetime earnings for those with a criminal record—and in aggregate suppressed wages among people with past convictions add to more than $372 billion every year.
The wage penalty also varies with the severity of the crime. Formerly incarcerated workers see their pay cut in half, while those with non-custodial felonies or misdemeanors lose about a quarter and one-sixth of their earnings, respectively.
Tip
About 77 million Americans—about one-third of all adults—have some form of criminal record that may appear in an employment background check.
Why Employers Offer Less
Employers’ concerns cluster largely around two issues: perceived stigma and regulations.
Audit studies (where researchers send out pairs of otherwise identical, fictitious résumés that differ in only one respect, whether the applicant discloses a criminal record) have demonstrated that simply listing a prior felony halves call-back rates, with an even sharper drop for Black applicants. This suggests employers are hesitant to give applicants with any criminal record even a first interview, let alone invest in hiring or training them, because they worry about liability, safety, and reputational risks.
However, beyond stigma and employer wariness, many occupations, such as healthcare finance, education, and transportation, outright bar applicants with certain convictions. The U.S. Chamber of Commerce notes that even a minor offense can shave 16% off wages because it funnels workers into industries that pay less and lack means for advancement.
Demographic Disparities
Because arrest and conviction rates are structurally higher for Blacks and Latinos, this wage penalty compounds existing racial pay gaps. Women with records, while fewer, tend to earn even less relative to similar women without records than men do, largely because they are over-represented in care-sector jobs that conduct extensive background checks.
The Bottom Line
A criminal record can be a permanent pay cut that compounds over a working lifetime. Stigma, mandatory background checks, and statutory job bans funnel millions into lower-wage work, costing individuals hundreds of thousands of dollars in their lifetime and the economy tens of billions annually.
For policymakers and employers, “second-chance” hiring and clean-slate record sealing are not just social-justice measures; they can also be sound economic policy that unlocks a vast, underutilized talent pool.
Picture this: You’ve been steadily increasing your income and collecting your well-earned annual bonus. But you’ve also noticed yourself eating out more often, opting for more expensive brands, and making more purchases.
Lifestyle inflation, or lifestyle creep, is when an increase in earnings leads to a rise in discretionary spending, often leading to less disposable income, fewer savings, and lower financial security. From 2022 to 2023, American consumer spending increased across all income levels by an average of 5.9%, but at the same time, only 54% of adults have 3 months of emergency savings.
Lifestyle inflation is not always a bad thing, and you should not feel guilty for increasing your quality of life. However, some indulgences might be better spent elsewhere, and determining the necessary purchases from the unnecessary ones can help you ensure your long-term financial goals and freedom.
Here are eight ways to avoid unnecessary lifestyle inflation:
Key Takeaways
Lifestyle inflation is when an income increase leads to increased discretionary spending that may hinder your long-term financial goals.
Set financial goals and stick to a budget based on your values to guide spending and avoid unnecessary lifestyle inflation.
Spend mindfully by questioning purchases, delaying gratification, and decluttering for extra cash.
Build financial resilience by creating an emergency fund, planning debt repayments, and automating investments and savings
Staying aware of lifestyle inflation and remaining goal-oriented will help you meet your long-term financial goals.
1. Set Clear Financial Goals
Clear financial goals will help you evaluate your tolerance to lifestyle inflation, so you can make financial choices with peace of mind.
Money is deeply personal, and when setting these goals, make sure to contextualize them within your own values. You may ask yourself:
Do I care about retiring early?
Do I want to focus on traveling while young?
Do I want to save for a family home or my children’s education?
Grounding goals in personal priorities can help you determine your budget and stick to it in the long run.
2. Make a Budget
Once you determine your financial goals, making a comprehensive budget can keep your finances organized. With basic guidelines and a record of your spending, you can stay accountable to your goals and control any lifestyle inflation.
Note
Lifestyle inflation can keep you in an emotionally taxing state of financial insecurity. Along with your budget, it may be useful and rewarding to track your feelings towards money for future reference.
3. Practice Mindful Spending
In a world of online shopping and credit cards, it’s easy to hit the “order now” button without a second thought. However, these discretionary purchases are the main drivers of lifestyle inflation, and it is critical to shop with intention.
To practice mindful spending, you may ask yourself:
Is this a want or a need?
Am I only buying this to gain external validation from others?
Is this something I actually want or is it just on sale?
Would I want this if I hadn’t just received my paycheck?
Would I rather put this money towards another part of my life?
Similarly, you might want to restrict yourself from making a purchase for a week to determine if it’s really worth it. Whether you go forward with the purchase or not, these exercises can help you feel confident that it’s not an impulse buy and that the expense is aligned with your financial goals.
Tip
Consider selling clothes, furniture, toys, or other items you no longer need. While keeping the clutter at bay, you can make more money to cushion your budget and discretionary spending.
4. Determine your financial threshold
Investing in your quality of life is important, but the bigger car and fancier home may not be “worth it” for you personally. Consider looking back on your significant lifestyle changes, such as house, car, and city, to understand how much you are comfortable spending on each. Downsizing or moving are major changes, but these options may help you reach your long-term goals.
5. Create an Emergency Fund
If it’s not already baked into your budget, make an emergency fund. Budgeting and planning is always helpful, but the future is uncertain, and a fund can assure you that the basics will be covered during a potential crisis.
6. Prioritize Paying Your Debt
Remaining debts can be a financial and emotional drag, but prioritizing debt repayment over discretionary purchases can not only help you curb lifestyle inflation but also set you on a path towards financial freedom.
7. Automate Savings and Investments
Automating payments into retirement, brokerage, or savings accounts is a one-click step to set yourself up for financial success. Plus, by automating payments and treating savings as a fixed expense, like a utility or phone bill, you can reframe your discretionary spending budget to make more mindful purchases.
8. Perform regular check-ins
These tips are helpful starting points, but curbing lifestyle creep requires reevaluation as your income and budget inevitably change.
When your income changes, consider using the percentage rule, also known as the 50-30-20 rule, a budgeting practice of looking at your income in proportions instead of as numbers, so you allocate money across diverse fields.
Plus, if you are budgeting with your family or a partner, having honest and non-accusatory check-in conversations can help you stay accountable for combating lifestyle inflation.
The Bottom Line
Lifestyle inflation can stunt long-term financial growth, but you can avoid the cycle by setting goals, budgeting with intention, making mindful purchases, and regularly evaluating your financial health. Financial advisors can provide professional, personalized support if you want further support.
It’s natural for your lifestyle to become more expensive as your income increases. Staying aware of lifestyle inflation and making financial choices with proactivity and discipline can help you meet your long-term goals.
Tesla shares slid Wednesday as sales data from several countries indicated year-over-year declines in the EV maker’s sales.
Tesla sales fell in May compared with a year ago in Germany, Italy, and the U.K., while rising in Australia and Norway, per CNBC and Reuters.
Tesla sales have struggled this year as the EV maker has faced protests related to CEO Elon Musk’s involvement in U.S. politics.
Shares of Tesla (TSLA) lost ground Wednesday as reports indicated the electric vehicle maker’s sales continued to slip in some key markets last month.
Sales declined again in May across Germany, Italy, and the U.K. Shipments from the company’s factory in China, which are delivered within China and to other markets, also fell last month, according to reports.
However, Tesla also has received some positive news lately, as sales reportedly rose in Australia and Norway in May, according to CNBC and Reuters.
Revamped Model Y May Help UK Sales
The company told Reuters it expects sales to pick up in June, at least in the U.K., where a spokesman there said the automaker had sold through its stock of Model Y SUVs as it awaited delivery of the new version of the popular model. The revamped Model Y was launched in the U.S. earlier this year.
Tesla shares finished close to 4% lower Wednesday, and are off more than 17% since the start of the year, as a rally sparked by CEO Elon Musk saying he would refocus on Tesla and his other companies has slowed in recent weeks. The EV maker has seen sales slump in the U.S. and abroad so far this year amid pushback to Musk’s involvement with the Trump administration.
The S&P 500 eked out a gain of less than 0.1% on Wednesday, June 4, 2025, as soft results from a private payroll report raised concerns about the job market.
ON Semiconductor shares extended their move higher following the CEO’s positive comments on automotive and industrial demand.
Dollar Tree shares plunged as the discount retailer said tariffs could pressure its earnings this quarter.
Major U.S. equities indexes finished Wednesday mixed after a report showed job creation by private employers hitting a two-year low in April, prompting President Donald Trump to reiterate calls for interest-rate cuts by the Federal Reserve.
The S&P 500 ended the midweek session with a gain of less than 0.1%. The Nasdaq added 0.3%, but the Dow was down 0.2%, snapping a streak of four straight winning sessions for the blue-chip index. read Investopedia’s full coverage of today’s trading here.
ON Semiconductor (ON) shares rose 6.1%, securing the top daily performance in the S&P 500. Wednesday’s move higher tacked onto gains posted in the prior session after Onsemi CEO Hassan El-Khoury told a tech conference that the company is seeing signs of a recovery in demand.
GlobalFoundries (GFS) said it plans to invest more than $16 billion to increase chip production in the U.S. The maker of so-called essential semiconductors said it is collaborating with companies like Apple (AAPL) and General Motors (GM) to support domestic chip manufacturing. Shares of NXP Semiconductors (NXPI), also mentioned as a partner in the U.S.-made chip initiative, gained 5.6%. GlobalFoundries shares were up 2.3%.
D.R. Horton (DHI) stock gained 4.4%, and shares of other homebuilders also moved higher. A downtick in Treasury yields and Trump’s renewed pressure on Fed Chair Jerome Powell to cut interest rates brightened the outlook for mortgage borrowing costs.
Dollar Tree (DLTR) shares dropped 8.4%, losing the most of any S&P 500 stock on Wednesday, as the discount retailer cautioned that tariffs could weigh on profitability in the current quarter. Although its net sales, comparable-store sales, and adjusted earnings per share for the fiscal first quarter topped estimates, Dollar Tree warned that second-quarter adjusted EPS could be down as much as 50% year-over-year as the company works to alleviate tariff-related costs.
An underwhelming outlook also pressured shares of CrowdStrike Holdings (CRWD), which sank 5.8% after the cybersecurity firm’s quarterly revenue forecast came in below consensus estimates. Despite the guidance, several research firms boosted their price targets on CrowdStrike shares, with Deutsche Bank highlighting the need for additional cyber defenses as companies deploy more artificial intelligence applications. Bank of America analysts downgraded CrowdStrike stock to “neutral,” citing a high valuation and an expectation for revenue growth to taper off of the next few years.
Constellation Energy (CEG) stock slipped 4.3%. Although the shares initially surged following Constellation’s announcement of a 20-year deal to sell nuclear power to Facebook parent Meta Platforms (META), they failed to hold on to those gains. Citi analysts downgraded Constellation Energy stock to “neutral” from “buy,” citing limited upside following the recent rally and noting that the Meta agreement could have implications for future power contract negotiations.
Investors are attempting to figure out from day to day what the next twist in Trump’s tariff policy could be and how it might affect stocks.
The upshot, for some, is the belief that Trump eventually delays or otherwise modifies policies the market doesn’t like, so trade-policy negativity will be shaken off before long.
There’s a nickname for this: the “TACO Trade.” But investors have mixed opinions about whether it’s a safe bet.
The “Trump Trade” has evolved. How investors should play it is up for debate.
The early days of President Donald Trump’s second administration supercharged a climb in stocks that started late last summer, lifting the major indexes and some specific assets—shares of Tesla (TSLA), cryptocurrency—in particular. Sprinkled in was volatility around stock and sectors seen as likely to be helped or hurt by spending and regulatory efforts.
Some of that remains in place, but the action these days is largely around global trade policy. Investors are attempting to figure out from day to day what the next twist in Trump’s tariff strategy could be and how it might affect stocks in the hours, days and weeks ahead.
That’s taken on particular salience since stocks swooned after the April 2 “Liberation Day” tariff announcements and then began working their way back. The upshot, for some, is the belief that Trump eventually delays or otherwise modifies policies the market doesn’t like, so trade-policy negativity will be shaken off before long.
There’s an alliterative nickname for this: the “TACO Trade,” short for “Trump Always Chickens Out,” coined last month by a Financial Times columnist. (Asked about it at a press conference, Trump was unamused.) Discussion of the term has taken on a political character and become fodder for The Wall Street Journal, The New York Times, and other publications—now including this one—but it has also found its way to the lips of investors and analysts.
Are Investors Too Sanguine?
BCA Research mentioned it in a note earlier this week, calling the trade “overcooked” and suggesting that investors may have grown too sanguine. “Risk assets price in trade deals and de-escalation along with limited policy damage despite ongoing volatility,” they wrote. Pepperstone analyst Michael Brown in late May effectively equated taco trading with buying the dip.
Deutsche Bank analysts in their own note this week didn’t use the taco term, but—in raising their year-end target for the S&P 500—cited the idea that “the administration had already relented, driven primarily by the market reaction, and before the emergence of significant economic or political pain. This reinforces the view that if negative impacts of tariffs do materialize, we will get further relents.”
Other factors have undoubtedly aided stocks in recent weeks even as questions about the path forward for trade and the economy remain. The first-quarter earnings season was generally seen as strong, and Nvidia’s (NVDA) results and outlook have supported the AI trade. Futures markets indicate an expectation that the Federal Reserve cuts rates twice by the end of the year, as the job market shows signs of weakness and inflation approaches the Fed’s target.
Tariff Drama Likely to Continue
JP Morgan analysts on Tuesday shared a calendar of key trade dates in the coming months, noting a litany of summits and policy expirations—a 90-day pause on tariffs against the EU expires next month, and reduced U.S.-China tariffs are set to pass in August—between now and the end of the year. The administration reportedly asked countries to submit their “best offers” in trade negotiations by Wednesday.
Some investors don’t buy the inevitability of bullishness around trade news. “We think that, unfortunately, as the so-called ‘TACO Trade’ becomes more viral, it becomes more likely that Trump will stick to higher tariffs just to prove a point,” Panmure Liberum Head of Strategy Joachim Klement recently told a Reuters interviewer.
In short, it may not pay to oversimplify the effect that trade could have on markets in the coming months. “There are no signs of a summer break from tariff drama,” JP Morgan wrote.
The Federal Reserve has held rates steady so far in 2025, but at least one cut is expected this year.
If you’re house hunting, waiting for the Fed rate to drop—in hopes it will trigger lower mortgage rates—could backfire.
There’s no guarantee the Fed will cut rates this year, given ongoing economic uncertainty.
Even with a Fed rate cut, mortgage rates could still rise, as they aren’t directly tied to the Fed’s benchmark.
If you’re ready to buy and find the right home, locking in a mortgage now makes sense—since you’ll have the option to refinance later.
The full article continues below these offers from our partners.
For House Hunters, Rate Timing Is Difficult
With today’s mortgage rates hovering in upper-6% to lower-7% territory, it can be tempting to hold out, delaying your purchase of a home until rates come down. And there is some wisdom in striving for the lowest mortgage rate you can secure, since a quarter- or a half-point rate difference can add up to hundreds or even thousands of dollars saved every year.
But if you’re thinking you’ll score a better mortgage rate if you can just wait until the Federal Reserve starts cutting rates later this year, you could be sabotaging your home-buying process. That’s because a lower Fed rate is not a sure thing this year. In addition, Fed rate cuts don’t necessarily mean mortgage rates will fall. Here’s why you’re likely better off buying when the time is right for your situation, rather than pegging your timing to the Fed.
A Fed Rate Cut Is Expected—But Not Until Fall, and Not Guaranteed
After lowering interest rates three times between September and December last year, the Federal Reserve moved into neutral with a rate hold in January, followed by further pauses in March and May. Though another Fed rate-setting meeting is upon us in two weeks, the overwhelming expectation is that the central bank will hold its benchmark rate steady yet again.
In addition, the CME Group’s FedWatch Tool shows markets currently place a 70% probability on the Fed’s July meeting also resulting in a rate hold. In fact, it’s predicted we won’t see a first 2025 rate cut until the meeting after that, which concludes with an announcement on Sept. 18.
But that September meeting is more than three months away, and a lot can happen in the economy during that time. In particular, the central bankers are watching closely for impacts of President Donald Trump’s ever-evolving tariff policy. For instance, we could see inflation tick back up. Or negative impacts could rear their head in the job market. These are competing problems and could make the Fed’s rate decisions difficult.
All this is to say that while the current expectation is that the Fed will begin lowering rates in September, anything can happen. Given the potential fallout from tariffs and possible trade wars, the Fed has been acknowledging how extremely uncertain things are right now. It’s therefore not inconceivable that the central bank could find itself holding rates at this high level for many more months than currently expected.
That’s one reason why waiting for a Fed rate cut may not be your best bet if you’re ready to move on a mortgage now. But there’s another reason.
It’s a common belief that when the Federal Reserve raises or lowers the federal funds rate, mortgage rates will move in sync. But in reality, the relationship between the Fed’s benchmark rate and what mortgage lenders offer is not so direct. Instead, moves by the central bank more directly impact short-term rates, such as those paid on bank accounts as well as those charged on credit card and personal loan balances.
Fixed mortgages are instead a long-term rate, and their connection to Fed rate changes is more tenuous. A tangle of economic factors affect the mortgage lending market, including inflation, consumer demand, housing supply, the strength of the current economy, and the status of the bond market, especially that of 10-year Treasury yields. Given these other influences, mortgage rates and the Fed funds rate can move independently—even in opposite directions.
That’s exactly what we saw in the last quarter of 2024, when mortgage rates shot up despite a bold half-point rate cut in September. Not only that, but after two more Fed reductions, 30-year mortgage rates surged again in late December and January, reaching almost 1.25 percentage points higher than before the Fed’s September rate cut.
Fallout from President Trump’s tariff policy, initiated on April 2, has also pushed mortgage rates around. Initially, the stock market dropped, sending bond yields lower. This caused a quick mortgage rate decline. But the massive uncertainty surrounding tariffs, and the trade wars they’ve ignited, later sent bond yields much higher, causing mortgage rates to surge.
Since then, the average 30-year mortgage rate has again fallen, continuing a roller coaster ride fueled by market uncertainties waiting to be resolved. Yet all of this mortgage rate movement has occurred while the federal funds rate has not moved an inch.
That means for mortgage shoppers, there’s no guaranteed payoff from a Fed rate cut, whenever it finally arrives. And no one can reliably predict where mortgage rates are headed the rest of this year—they could move even higher. So instead of looking to the Fed, it’s likely best to lock in a mortgage rate when the timing makes sense for your finances—and the right home comes along.
Today’s Mortgage Rate News
We cover new purchase and refinance mortgage rates every business day. Find our latest rate reports here:
Tesla (TSLA) CEO Elon Musk on Wednesday ramped up his criticism of President Trump’s signature budget legislation.
Musk, who just last week left his role leading the Department of Government Efficiency, posted on X Wednesday, “Call your Senator, Call your Congressman, Bankrupting America is NOT ok! KILL the BILL.” The post comes after Musk on Tuesday called the proposal a “disgusting abomination” that would “massively increase the already gigantic budget deficit.”
White House Press Secretary Karoline Leavitt said in a press conference Tuesday that Musk’s attacks wouldn’t change President Trump’s support of the bill.
The budget bill, dubbed the “One Big Beautiful Bill,” passed by one vote in the House last month. In the Senate, it would take four Republicans joining Democrats in voting against the bill to prevent it from passing.
The bill extends many provisions of the 2017 Tax Cuts and Jobs Act that were set to expire at the end of the year and adds new tax cuts including eliminating income tax on car loan interest, overtime pay, and tips. Additionally, the bill would cut funding for Medicaid and the SNAP food aid program, among other changes.
