Following its July meeting, the U.S. Federal Reserve maintained the target range for the federal funds rate at 4,25-4,5% per year. The central bank noted that inflation remains above the 2% target and economic uncertainty is still elevated. The Fed stated that it is closely monitoring risks and remains prepared to adjust policy if necessary.
Economic Growth Has Slowed
According to the Federal Open Market Committee (FOMC), GDP growth slowed during the first half of the year. Unemployment remained low, and the labor market continues to show resilience. However, inflationary pressure persists, partially intensified by higher tariffs. The Fed did not provide a clear outlook for future decisions and indicated it will continue to rely on incoming data, including employment and inflation reports.
Powell Refused to Comment on the September Decision
Fed Chair Jerome Powell emphasized that no decision has been made regarding September and that there are no plans to make one in advance. He added that before the next meeting, the Fed will receive two more rounds of key macroeconomic data, which will inform its next steps. According to Powell, the current position allows the Fed to respond quickly to changing conditions.
Tariffs Are Increasing Inflationary Pressure
According to Powell, the impact of new tariffs is already visible in consumer prices for specific goods categories. He suggested that Trump’s tariffs are likely to exert greater pressure on overall inflation going forward. The regulator will continue monitoring the situation and assessing its consequences.
Disagreements Within the Committee
Those who voted to keep the rate unchanged included Chair Powell, Vice Chair John Williams, Michael Barr, Susan Collins, Lisa Cook, Austan Goolsbee, Philip Jefferson, Alberto Musalem, and Jeffrey Schmid. Dissenting votes came from Michelle Bowman and Christopher Waller, who proposed a 0,25 percentage point rate cut.
Markets Adjust Expectations
According to FedWatch data, following Powell’s comments, traders lowered the probability of a rate cut in September to 45,2%. His remarks were interpreted as a signal for a more cautious approach. Despite this, markets are still pricing in one or two rate cuts by the end of the year.
