FOMC on hold while pressure to cut rates builds
Summary
On Wednesday, July 30, 2025, the Federal Open Market Committee (FOMC) voted to hold the Fed Funds rate at a target range of 4.25%-4.50%. This follows months of mounting political pressure on Chair Powell to cut rates. For the first time since 1993, two Fed Governors dissented on the rate decision. The dissent shows the market that internal disagreement is building on rates decisions. The Fed’s statement reiterated the committee's dual mandate of maximum employment and returning inflation to their 2% target. Chair Powell remained adamant that the Fed remains data dependent, and there are still signs of strength in the economy. Powell also noted that the new tariffs are just starting to impact consumer prices. The Fed board will continue to monitor data to guide their decisions.
Impact on rates
After the meeting, the market is now pricing in one full cut in the remainder of 2025, with futures pricing in the first following the October meeting. After the announcement, short-term rates briefly decreased, but ended up 7 basis points. Chair Powell’s comments at the press conference signaled to the market that the Fed may continue to hold rates to monitor the inflation impact from tariff policy. Chair Powell restated that the FOMC board does not want to cut rates too early due to previous instances where inflation increased due to premature rate cuts.
Source: Chatham Financial
Moving forward
The market will remain focused on inflation and jobs numbers. There will be two inflation and jobs reports released before the September meeting. If both have supportive readings, it may give the FOMC enough data to decide to cut rates at that meeting. Additionally, speeches from Fed members will be closely watched for possible signs of the upcoming path for rates. Fed members may continue to show an internal divide on the path for rate cuts, potentially creating rate volatility as the market reacts to new comments. The Fed’s statement noted that economic uncertainty remains elevated, and the committee will continue to be attentive to both sides of its dual mandate. Powell also noted that tariff induced inflation is only starting to show in consumer prices, and if they start to see signs of inflation remaining sticky, they will adjust their policy accordingly.
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Disclaimers
Chatham Hedging Advisors, LLC (CHA) is a subsidiary of Chatham Financial Corp. and provides hedge advisory, accounting and execution services related to swap transactions in the United States. CHA is registered with the Commodity Futures Trading Commission (CFTC) as a commodity trading advisor and is a member of the National Futures Association (NFA); however, neither the CFTC nor the NFA have passed upon the merits of participating in any advisory services offered by CHA. For further information, please visit chathamfinancial.com/legal-notices.
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