July 31, 2025—The Federal Open Market Committee (FOMC) held rates steady at its meeting this week. In the Federal Reserve’s post-meeting statement, the Fed acknowledged that economic activity had moderated in the first half of the year and that uncertainty about the outlook remains elevated. While the unemployment rate remains low and inflation is still somewhat elevated, the Fed signaled a cautious approach regarding potential rate changes.
The FOMC voted 9-2 with two Fed Governors formally dissenting, to lower rates by 25 basis points, marking the first time since 1993, that two Governors have done so. Fed Vice Chair for Supervision Michelle Bowman and Fed Governor Christopher Waller cited weakening GDP growth and a slowing labor market in their dissent. Both are Trump administration appointees, with Waller being seen as the favorite to replace Chairman Jerome Powell when his term expires next May.
During his regular press conference Wednesday, Fed Chair Jerome Powell said that “higher tariffs have begun to show through more clearly to prices of some goods, but their overall effects on economic activity and inflation remain to be seen.” Powell reiterated that future policy will depend on incoming data and evolving risks, leaving the door open for adjustments if warranted.
Where market expectations once expected three cuts this year, many economists now believe that the FOMC will also keep the status quo at the September meeting, with signs of rising inflation steadily creeping in. Economists at both JP Morgan and Deutsche Bank only have a cut penciled in at the December 2025 meeting with more to come in early 2026.