Happy Friday! Check me out on the TV/radio today. I'll be on Cheddar this afternoon, followed by a stop at "After the Closing Bell" on Fox Business and then chatting with my Uncle Kai Ryssdal on "Marketplace" this evening.
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Illustration: Aïda Amer/Axios
Ally Financial was the latest bank to declare a major profit windfall in its second quarter earnings report, as the U.S. banking industry's largest auto lender reported a profit increase of 67%.
Why it matters: Americans are borrowing record sums to buy new vehicles — and used ones — and they continue to pay relatively high interest rates. Banks are seeing big profits as a result.
The intrigue: U.S. Treasury yields have fallen to their lowest level in more than 2 years, pushing down interest rates on bonds and savings accounts. Yet, Fed data shows auto loan rates in Q2 remained well above their average over the past decade, and even higher than in the fourth quarter of 2018 when Treasury yields reached their highest since 2011.
What's happening: U.S. consumers are scaling back on new vehicle purchases and even buyers with top tier credit are opting for used instead of new, data shows, but the banks continue to squeeze big profits.
Where it stands: Experian, which tracks millions of auto loans each month, said the average amount Americans are borrowing for a new vehicle rose to a record high of more than $32,000 last month.
"We have not seen a slowdown in loan demand. In fact, volume for new and used loans is up from previous years," Melinda Zabritski, senior director of automotive financial solutions for Experian, told CNBC in June.
The bottom line: Investors have worried that lower rates will hurt banks' profit margins and income. So far, that hasn't been the case.
Fed data shows credit card assessed interest hit a fresh all-time high in Q2, rising to more than 17% for the first time ever.
While credit card and auto loan rates aren't falling, mortgage rates are.
What's happening: U.S. mortgage giant Fannie Mae said in a recent report it expects average U.S. 30-year fixed-rate mortgages rates will drop to 3.7% in the second half of 2019, lowered from expectations of 3.9% in the second half analysts predicted just a month ago.
And while the housing market remains out of reach for many Americans, there are some locations where so-called starter home prices remain significantly below the national average.
The Fed's regional manufacturing indexes are bouncing back in July after an awful June swoon, none more so than the Philadelphia region, which rose to 21.8 from a 0.3 reading in June.
Details: Many of June's regional Fed surveys were conducted during the week President Trump threatened to impose tariffs on imports from Mexico in addition to tariffs on $200 billion worth of Chinese goods.
If there was uncertainty about whether the Fed planned to lower interest rates at its policy meeting this month, New York Fed President John Williams, St. Louis Fed President James Bullard and Fed Vice Chair Richard Clarida all but ended it Thursday afternoon.
The big picture: The Fed has been setting up this rate cut since April. Since then policymakers have been shifting the focus from being "data dependent" to worrying about the unknown impacts of the U.S.-China trade war and slowing global growth, which has been happening since the year began, but wasn't highlighted until recently.
What they said: "The U.S. economy is in a good, good place," Clarida told Fox Business. "We have a solid growth rate. We have a strong labor market. Inflation is stable."
But, but, but: "The global economy's slowing, business investment has been soft. There [are] disinflationary headwinds abroad and these uncertainties are something that we talked about in our June meeting. We'll talk about them again in July."
New York Fed's Williams made the case for pre-emptive cuts during a speech in New York, saying, "When you only have so much stimulus at your disposal, it pays to act quickly to lower rates at the first sign of economic distress."
St. Louis' Bullard —who dissented at June's meeting, calling for a 25-basis-point cut — said in an interview that a couple rate cuts would likely prove warranted this year because of "trade uncertainty," which President Trump has moved "to the front burner."
What's next? The Fed begins its blackout period this weekend, so these were some of the last comments from Fed officials before their policy meeting on July 30–31.