The U.S. Q1 2025 GDP contracted at an annualized rate of 0.5%, below the expected -0.2% and a sharp decline from Q4 2024’s 2.4% growth, driven by a surge in imports and reduced government spending. This marks the first negative GDP reading since Q1 2022, raising concerns about economic slowdown and potential recession risks, though analysts note a single quarter of contraction doesn’t confirm a recession.

The reported 94% odds of Federal Reserve rate cuts by September 2025 align with market sentiment reflected in fed funds futures, which have priced in a high probability of easing due to weaker growth and rising inflation pressures (core PCE at 3.5% vs. 3.2% expected). Posts on X and economic forecasts suggest tariffs and policy uncertainty are fueling stagflation risks, prompting expectations of one or two 25-basis-point cuts by year-end, with some analysts eyeing July as a possible start. However, the Fed may delay cuts if inflation remains elevated, as tariffs could push prices higher.

A negative GDP print, the first since Q1 2022, signals potential economic weakness. While one quarter of contraction doesn’t confirm a recession (typically requiring two consecutive quarters), it heightens concerns, especially with slowing consumer spending (down to 1.8% growth from 3.1% in Q4 2024) and reduced government expenditure. Imports surged (contributing to the GDP decline), reflecting trade imbalances possibly exacerbated by tariff expectations, which could further dampen growth if sustained.

The 94% odds of rate cuts by September (likely one or two 25-basis-point reductions) stem from fed funds futures reflecting market bets on monetary easing to counter slowdown risks. Some X posts suggest markets are eyeing July for a potential cut if Q2 data weakens further. However, persistent inflation (core PCE at 3.5% vs. 3.2% expected) and potential tariff-driven price increases create a stagflation risk, complicating the Fed’s decision. Cutting rates too soon could fuel inflation, while delaying cuts risks deeper economic contraction.

Weaker GDP growth typically pressures stock markets, particularly growth-sensitive sectors like technology and consumer discretionary. X posts highlight mixed sentiment, with some investors betting on defensive sectors (e.g., utilities, healthcare) as growth slows. Treasury yields may decline as rate cut expectations rise, with the 10-year yield already softening post-GDP release (check Bloomberg or Reuters for real-time data). However, tariff-driven inflation could push yields higher if price pressures intensify.

A dovish Fed outlook weakens the USD, though tariff policies could bolster it by increasing import costs. FX markets are volatile, per recent X discussions. Proposed tariffs (e.g., 10-20% on imports) under discussion in policy circles could raise costs, further slowing growth while pushing inflation higher. X posts reflect fears that tariffs could negate rate cut benefits, creating a stagflationary environment.

Business investment, already soft (contributing to the GDP miss), may remain subdued amid uncertainty over trade policies and Fed actions. Some economists and investors argue that rate cuts will stimulate growth, particularly in housing and consumer spending, preventing a full recession. They point to strong labor markets (unemployment at 4.1% in recent data) and resilient corporate earnings as buffers. X posts from this camp emphasize the Fed’s ability to “soft land” the economy.

Others warn that rate cuts may be ineffective or premature given sticky inflation and tariff risks. They argue that easing could weaken the USD and fuel price pressures, especially if supply chain disruptions worsen. X discussions highlight fears of 1970s-style stagflation, with some users citing rising commodity prices (e.g., oil, metals) as warning signs. Some investors see rate cuts as a catalyst for equity rallies, particularly in rate-sensitive sectors like real estate and small caps. They argue that the GDP miss is a one-off, driven by temporary factors like import surges.

Others predict prolonged market volatility, pointing to declining consumer confidence (e.g., Conference Board index at 66.8, below expectations) and tariff uncertainty. Bears on X argue that valuations remain stretched, and a recession could trigger a deeper correction. Some policymakers and X users support tariffs to boost domestic manufacturing and reduce trade deficits, arguing that short-term pain (higher prices, slower growth) is worth long-term gains.

Others, including economists and business leaders, warn that tariffs will raise costs, hurt consumers, and exacerbate the GDP slowdown. X posts from this group emphasize global trade retaliation risks, citing Canada and EU responses to past U.S. tariffs.

A London tribunal has ruled that Visa and Mastercard’s multilateral interchange fees violate European competition law, delivering a major blow to the global payment giants and a significant win for hundreds of merchants who brought legal action over what they called excessive charges.

The Competition Appeal Tribunal (CAT) delivered the unanimous ruling on Friday in the latest chapter of a long-running legal battle over the fees that merchants are charged whenever customers pay using credit or debit cards.

The case was brought by a coalition of retailers represented by law firm Scott+Scott, which argued that the card networks colluded in setting anti-competitive “default” interchange fees—charges that merchants pay to the cardholder’s bank with every transaction.

“This is a significant win for all merchants who have been paying excessive interchange fees to Visa and Mastercard,” said David Scott, global managing partner of Scott+Scott, in a statement following the ruling.

Companies Push Back, Vow to Appeal

Both Visa and Mastercard swiftly signaled their intention to challenge the verdict.

A Visa spokesperson defended the company’s practices, saying: “Visa continues to believe that interchange is a critical component to maintaining a secure digital payments ecosystem that benefits all parties, including consumers, merchants and banks.”

Meanwhile, Mastercard dismissed the decision as “deeply flawed.”

“Mastercard strongly disagrees with today’s decision… and will seek permission to appeal,” a company spokesperson said.

The ruling specifically targets the multilateral interchange fees (MIFs) applied to both commercial card transactions and inter-regional payments—which have historically been defended by the card giants as necessary for balancing interests within the payment system.

However, the CAT found that the fees were not individually negotiated and instead set by the card schemes at default rates—restricting competition and forcing merchants to absorb higher transaction costs.

Friday’s decision is especially significant because it is the first time a court has ruled that Visa and Mastercard’s commercial and inter-regional interchange fees breach competition rules, according to Scott+Scott. The ruling adds new pressure on the companies, who have faced similar antitrust scrutiny in the European Union, United States, and other jurisdictions for more than a decade.

At the heart of the dispute is the role of interchange fees, which typically range from 0.2% to 0.3% of the transaction value in many regions, but can be higher for certain card types or cross-border payments.

The European Commission had previously ruled that such fees were anti-competitive, prompting regulatory caps in the EU in 2015. However, the UK ruling focuses on historical fees and commercial cards, which have often been exempt from such regulatory caps, especially in inter-regional transactions involving non-European banks.

Legal Victory with Geopolitical Implications

Although rooted in antitrust, the ruling carries broader geopolitical weight. It comes amid escalating trade tensions between the EU and the United States, driven by President Trump’s imposition of blanket 20% tariffs on key European exports. In April, EU Commission President Ursula von der Leyen warned that if the bloc failed to negotiate its way out of the tariffs, “all options are on the table,” including targeting U.S. Big Tech firms.

Brussels’ growing frustration with what it sees as U.S. protectionism has translated into sharper scrutiny of large American companies operating in Europe. The decision against Visa and Mastercard—both headquartered in the U.S.—is already being viewed by some analysts as part of a wider regulatory push by Europe to balance trade imbalances through enforcement actions.

The MIF ruling adds to a series of high-profile enforcement actions by the EU against U.S. tech giants in recent years.

While Friday’s ruling determines liability, a second trial is still pending to decide whether any overcharges were passed on by merchants to consumers—an issue that could influence potential damages or settlement amounts. This second phase is critical, as it will determine how much compensation, if any, the retailers are entitled to.

Given Visa and Mastercard’s plans to appeal, the case is unlikely to conclude anytime soon. But the decision marks a milestone in what could become one of the most consequential legal fights over interchange fees in the UK—and potentially across other jurisdictions eyeing similar actions.

If the ruling is upheld on appeal, Visa and Mastercard could face massive financial liabilities and renewed pressure to overhaul their fee structures in both commercial and cross-border markets.