Will the Fed hold steady?

Summary

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Podcast Summary: Marketplace Morning Report

Episode: Will the Fed Hold Steady?
Date: July 29, 2026
Host: Kimberly Adams
Runtime (excluding ads/outros): ~8 minutes

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Episode Overview

This episode of the Marketplace Morning Report dives into three major economic stories:

1. The Federal Reserve’s upcoming decision on interest rates amid global uncertainty.
2. The ongoing pullback in consumer grocery spending and the strategies grocers are using to adapt.
3. New U.S. tariffs targeting countries with “excess manufacturing capacity” and the complexities behind the policy.

Across these topics, the episode gauges anxiety and uncertainty pervading the U.S. economy, from the central bank to grocery aisles to the halls of international trade.

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Key Discussion Points & Insights

1. The Federal Reserve’s Rate Decision Amid Uncertainty

[00:31 - 01:51]

• Setting the Scene: The Fed concludes a two-day meeting with an interest rate announcement expected. The backdrop: uncertainty over the Middle East, oil prices, inflation, and GDP data.
• Expert Insight:
  • Jerry Templeman (former NY Fed economist):
    • Expects rates to remain unchanged at this meeting.
    • September’s decision could shift with more fresh data available.
    • "There's going to be two readings of inflation for both July and August in the CPI. There's going to be two readings of employment also for July and August." (Templeman, 01:23)
    • The Fed can’t ignore oil price shocks forever due to their broad economic impact.
  • Nancy Marshall Genser (Reporter):
    • Notes the complex web of variables at play (war, data releases, oil prices).

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2. Consumer Grocery Spending Under Strain

[01:51 - 03:50]

• State of the Market:
  • Companies like Procter & Gamble and Sprouts are reporting earnings amid clear nervousness in staple goods sectors.
  • Bain & Co. Analysis: Grocery spending is down ~2% year over year; shoppers are consistently pulling back.
• Why the Pullback?
  • Kurt Groeschel (Bain & Co.):
    • "That $300 big stock up grocery trip in 2019 is now costing you $400." (Groeschel, 02:25)
  • Increased gas prices.
  • Reduction in federal SNAP rolls post-rule change.
  • "Put that all together, it just ends up with consumers that are feeling very stretched." (Groeschel, 02:43)
• Adapting Strategies:
  • Consumers: Cut to essentials, favor store brands.
  • Retailers: Push loyalty programs, rotate sales—but limits exist due to high fixed costs.
  • Grocers seek new revenue streams through:
    • Collecting/selling customer data.
    • In-store and online advertising.
  • Bobby Gibbs (Oliver Wyman):
    • Margins on grocery items: ~2%; margins on grocery ads: ~50%.
  • Kristin Schwab (Reporter):
    • The shift to advertisement and data sales is now a key profit lever for grocers.

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3. New U.S. Tariffs and “Excess Capacity”

[05:19 - 08:30]

• Context:
  • Recent tariffs expired and have been replaced by new country-specific tariffs (Section 301 replaces Section 122).
  • Administration aims tariffs at countries with an “unfair trade advantage” via excess industrial capacity.
• Breaking Down ‘Excess Capacity’:
  • Jerry Templeman:
    • Explains manufacturers may build for future demand or consolidate operations.
    • "You don't want to build all the plants, assuming that demand will stay where it is. You want to try to figure out where is demand going to be in three years from now when my capacity comes online." (Templeman, 06:19)
• Scholarly Perspectives:
  • Katie Russ (UC Davis):
    • Governments might prop up sectors to maintain employment—potentially problematic if it suppresses foreign competitors.
    • “If you're subsidizing a firm so that it can constantly produce at high cost a product that it sells at very low cost, low enough to drive the firms in trading partners out of business, then one could see why people would feel that was problematic.” (Russ, 06:49)
  • Theresa Fort (Dartmouth):
    • Trade surplus ≠ unfair advantage.
    • Example: Norway’s salmon exports arise from natural advantages, not subsidies.
  • Rachel Brewster (Duke Law):
    • Unused capacity can result from cyclical business or seasonality (beach town restaurants as an analogy).
    • “Excess capacity isn't necessarily something that warrants a new tariff, since it could be evidence of all sorts of things.” (Brewster, 07:58)
    • Courts have typically sided with administrative discretion on these questions, so tariffs may remain.
• Policy Complexity:
  • The definitions and triggers for “unfair” capacity are debated, and legal challenges may be limited.

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Notable Quotes & Moments

• "There's going to be two readings of inflation for both July and August in the CPI. There's going to be two readings of employment also for July and August."
  — Jerry Templeman, [01:23]
• "That $300 big stock up grocery trip in 2019 is now costing you $400."
  — Kurt Groeschel, [02:25]
• "Put that all together, it just ends up with consumers that are feeling very stretched."
  — Kurt Groeschel, [02:43]
• "Margins on grocery items is around 2%, the margins on grocery ads is something like 50."
  — Kristin Schwab, summarizing Bobby Gibbs, [03:28]
• "You want to try to figure out where is demand going to be in three years from now when my capacity comes online."
  — Jerry Templeman, [06:19]
• “If you're subsidizing a firm … one could see why people would feel that was problematic.”
  — Katie Russ, [06:49]
• “The fact that Norway ... exports a lot of salmon doesn’t have anything to do with ... any kind of government subsidy. That was unfair, right?”
  — Jerry Templeman, [07:23]
• “Excess capacity isn't necessarily something that warrants a new tariff, since it could be evidence of all sorts of things.”
  — Rachel Brewster, [07:58]

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Timestamps for Key Segments

• Fed Meeting & Interest Rate Outlook: [00:31 - 01:51]
• Consumer Goods Earnings & Grocery Pullback: [01:51 - 03:50]
• Tariff Policy & Excess Capacity Explained: [05:19 - 08:30]

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Episode Tone

Analytical and informative, the episode reflects the uncertainty and complexity of contemporary economic issues, balancing expert analysis with accessible explanations for a lay audience.

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Transcript

[Marketplace Morning Report Host]

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[Kimberly Adams]

will the Fed hold steady given the uncertain outlook? From Marketplace in Washington, I'm Kimberly Adams. The Federal Reserve wraps up a two day meeting today with an interest rate announcement from Chairman Kevin Warsh this afternoon. This week's meeting takes place against an ever fluctuating background of uncertainty. Marketplaces Nancy Marshall Genser has more on what we can expect.

[Nancy Marshall Genser]

There are lots of questions swirling around this Fed meeting like will the war in the Middle east heat up again causing another spike in oil prices? And what will the data we get later this week on things like inflation and GDP look like? Jerry Templeman is a former New York Fed economist now with Mutual of America Capital Management. With all this uncertainty, he expects the Fed to leave rates unchanged this week. But he says the next meeting in September could be a different story because there'll be a lot more data by then.

[Jerry Templeman]

There's going to be two readings of inflation for both July and August in the cpi. There's going to be two readings of employment also for July and August.

[Nancy Marshall Genser]

Templeman says we could also have a better sense of the trajectory of the war by September. But even if we don't, he says the Fed can't ignore oil price shocks forever. Since energy goes into just about everything, higher oil prices could seep into the broader economy. I'm Nancy Marshall Genser for Marketplace.

[Kimberly Adams]

We're hearing from some companies in the consumer goods and grocery space today, including Procter and Gamble this morning and Sprouts after market close. It's a nervous time for companies that rely on selling essentials. A recent analysis from Bain Co. Shows consumers have been consistently pulling back on grocery spending for a year now, down an average of about 2%. Marketplace's Christian Schwab has more.

[Kristin Schwab]

It's no secret that a trip to the grocery store is more expensive than it was a handful of years ago. Kurt Groeschel leads the Americas retail practice at Bain and Company.

[Jerry Templeman]

That $300 big stock up grocery trip in 2019 is now costing you $400.

[Kristin Schwab]

It's a reason why consumers are pulling back on grocery spending. But it's not the only one. Gas prices are also up and snap enrollment has fallen since the federal government changed benefit rules.

[Jerry Templeman]

Put that all together, it just ends up with consumers that are feeling very stretched.

[Kristin Schwab]

To save money, shoppers are focusing on essentials and switching to store brands. Meanwhile, retailers are highlighting value by pushing loyalty programs or rotating sales. But Bobby Gibbs, a partner on Oliver Wyman's retail and consumer goods team, says there's a limit to the discounts companies can offer. Grocery is a high fixed cost business. They have to have the stores, they

[Justin Ho]

have to have the people in the stores, they have to have the logistics network.

[Kristin Schwab]

So stores have looked for other ways to earn, including collecting and selling customer data to brands or selling ad space.

[Justin Ho]

Those advertisements can be on site, you

[Kristin Schwab]

know, either in the store or much, much more common, you know, on the website, gibbs says. While margins on grocery Items is around 2%, the margins on grocery ads is something like 50. I'm Kristen Schwab for Marketplace.

[Nancy Marshall Genser]

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[Kimberly Adams]

the President's temporary tariffs expired last week, the Trump administration replaced them with a new round of import taxes levied country by country. These new section 301 tariffs replace the section 122 tariffs that were in place for the last few months. Don't worry, barely anybody can keep track of this. Meanwhile, the administration is in the process of implementing more of these new tariffs, arguing that the EU and 14 other countries have an unfair trade advantage due to excess capacity in certain manufacturing sectors. Marketplace's Justin Ho has more on what that means.

[Justin Ho]

A manufacturer's capacity refers to how much stuff it can potentially make at a given point in time.

[Jerry Templeman]

So think about a steel plant. If prices were high and consumers wanted more steel or businesses wanted more steel, how much steel could that plant churn out?

[Justin Ho]

Teresa Fort is an economics professor at Dartmouth. She says one reason why a company might have more capacity than it currently needs is if it thinks demand is going to go up.

[Jerry Templeman]

You don't want to build all the plants, assuming that demand will stay where it is. You want to try to figure out where is demand going to be in three years from now when my capacity comes online.

[Justin Ho]

Manufacturers might have extra capacity if they consolidate into a bigger production facility. They also might want to just build in some wiggle room. But the Trump administration is arguing that various industries in other countries have excess capacity because of government policies. Katie Russ, an economics professor at UC Davis, says governments might subsidize an industry.

[Nancy Marshall Genser]

If you're subsidizing a firm so that it can constantly produce at high cost a product that it sells at very low cost, low enough to drive the firms and trading partners out of business, then one could see why people would feel that was problematic.

[Justin Ho]

The Trump administration says it's found evidence of excess capacity in several countries based on their trade surpluses with the rest of the world. That includes Japan, Mexico, Norway, and other countries that export a lot of goods. But Theresa Fort at Dartmouth says having a trade surplus isn't necessarily a sign of anything nefarious.

[Jerry Templeman]

The fact that Norway, let's say, exports a lot of salmon doesn't have anything to do with, you know, any kind of government subsidy. That was unfair, right? It just has a comparative advantage in salmon because of where it is.

[Justin Ho]

The Trump administration says another sign of unfair practices is if countries have unused capacity. But Rachel Brewster, a professor at Duke Law School, says having unused capacity could simply be a sign that sales are down because of an economic downturn, for instance.

[Nancy Marshall Genser]

It could also be that you produce seasonal items. Beach town restaurants aren't at full capacity year long. You know, they're only at full capacity in the summer.

[Justin Ho]

Brewster says excess capacity isn't necessarily something that warrants a new tariff, since it could be evidence of all sorts of things.

[Nancy Marshall Genser]

It's possible then, that the court of International trade might say, this can support any finding. And if it supports any finding, then there's no true kind of demonstration of unfair actions.

[Justin Ho]

But Brewster says In the past, courts have been pretty deferential to the administration over these kinds of investigations, so these tariffs could stick around. I'm Justin Ho for Marketplace,

[Kimberly Adams]

and in Washington, I'm Kimberly Adams with the Marketplace Morning Report. From APM American Public Media.

[Kristin Schwab]

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