FILE – Federal Reserve Chairman Jerome Powell listens during an open meeting of the Board of … More
The Federal Open Market Committee will set short-term interest rates next Wednesday, July 30.
The Fed has held rates steady at 4.25% to 4.5% for the year so far, and markets do not expect an interest rate cut in July. However, a rate cut may be reasonably likely at the conclusion of the next meeting on Sept. 17. That’s according to the CME FedWatch Tool, which measures the expectations of fixed income markets.
Three topics are likely to be the focus of markets at the meeting.
The first is any response from Federal Reserve Chair Jerome Powell on the repeated pressure and criticism that President Trump and his administration has directed at Powell. In prior meetings Powell has been terse in his responses to questions on the topic, pointing out that he can’t legally be removed as Fed chair without cause but refusing to be publicly drawn on Trump’s comments.
The other things to watch for will be hints of a September cut and whether there is any dissent within the open market committee on the policy decision.
Trump’s Criticism of Powell
Trump is looking for lower interest rates, in part to lower the cost of servicing government debt. In contrast, the FOMC’s mandate is to maintain stable inflation and full employment. The FOMC has so far resisted cutting interest rates further while inflation remains above target and the jobs market apparently robust. Trump will nominate a new Fed chair when Powell’s term ends in early 2026 but, for now, Trump’s repeated criticism of Powell has been unusually intense and public for a sitting president. In contrast, Powell has avoided any direct public response.
A September Interest Rate Cut?
For now, markets view a September interest rate cut as more likely than not. The FOMC generally doesn’t try to surprise markets, so if a September cut is coming there may be clues either in the July statement or the accompanying news conference.
June’s Consumer Price Index inflation report did show some potential signs of tariff-related inflation in certain categories, which could concern the FOMC. Nonetheless, since February inflation has generally eased and the job market has held up well for 2025 on the most recent reports. FOMC officials have expressed the view that tariffs might raise prices and slow growth, but they are awaiting data. That issue may be resolved one way or the other in the coming months. So far, the FOMC’s position has essentially been to wait and see, especially as the jobs market has held up well on recent reports.
Dissent Within the FOMC?
As chair, Powell has achieved consensus on most recent monetary policy decisions. However, FOMC members can vote as they wish. With Trump’s elevated criticism of monetary policy and FOMC members potentially looking to win his favor ahead of a potential 2026 appointment as Fed chair, chances of dissent may be elevated. That said, Trump may appoint a Fed chair that is not currently on the FOMC.
Markets will be watching to see if there is consensus on the July policy decision. Even without Trump’s commentary the decision is still finely balanced given a cut may come at the subsequent meeting.
What To Expect
Markets expect rates to stay at 4.25% to 4.5% at the FOMC’s interest announcement on Wednesday, July 30. However, a cut might be coming at the next meeting on September 17. If so, look for a sign pointing in that direction in the FOMC statement or Powell’s news conference.
Based on past news conferences it appears unlikely that Powell will respond materially to Trump’s criticism. However, it will be notable if there is dissent within the FOMC on the decision on interest rates at the meeting. If so that may provide a hint that a September cut is coming. Ultimately, rates are expected to be held steady in July, but the meeting may change expectations for September’s meeting outcome.
