Fed Holds Rates Steady

The Federal Reserve decided to leave its benchmark interest rate unchanged at 4.25%–4.50% during its July 30, 2025, meeting, marking the fifth consecutive hold as policymakers continue to balance strong economic growth against persistent inflationary pressures. The decision, which came with a 9–2 vote, highlighted an unusual split within the Board of Governors, with Michelle Bowman and Christopher Waller dissenting in favor of a 25 basis‑point rate cut.

This rare double dissent underscores growing tension inside the Fed amid mounting political and economic uncertainty. While the economy showed resilience with Q2 GDP expanding at a 3% annualized pace following a mild contraction in Q1, inflation remains stubbornly above the central bank’s target, and risks from President Trump’s tariff policies add further complexity to the outlook. Despite public pressure from Trump, who has called for aggressive rate cuts of up to a full percentage point, Chair Jerome Powell and the majority of the committee adopted a cautious “wait-and-see” stance, signaling they will closely monitor incoming data on prices, employment, and trade impacts before making any move.

Financial markets, however, are betting on a potential rate cut as early as September, with futures indicating around a 60% probability, reflecting expectations that inflation will ease and economic conditions may soften enough to warrant monetary easing. This decision places the Fed at the center of both economic and political debates, with investors and policymakers alike watching closely for signs of a shift in strategy ahead of Powell’s term expiration in May 2026.