U.S. FOMC Meeting (July 29-30, 2025)

Fed holds for fifth consecutive meeting and keeps cards close to chest on September cut

• The Federal Reserve Open Market Committee (FOMC) maintained the federal funds rate in the 4.25% to 4.50% target range for the fifth consecutive meeting. The 'pause' on rate cuts comes after the FOMC lowered the funds rate by a total of 100 basis points (bps) over the final three meetings of 2024.
• There were minimal changes to the FOMC's post-meeting statement, with the only notable callout being the Committee citing growth as having moderated in the first half of the year compared to the prior statement's characterization of economic activity expanding at a "solid pace". However, the Committee still characterized labor market conditions as "solid", and inflation remaining "somewhat elevated". 
• The Committee still views uncertainty on the economic outlook as "remaining elevated". 
• Two of the eleven Committee members in attendance voted against the decision to hold the policy rate steady, with Michelle Bowman and Christopher Waller supporting a quarter-point rate reduction. This is the first time since 1993 that more than one governor broke rank to dissent.

Key Implications

• No surprises from the FOMC today. The labor market is holding up better than expected and inflation has edged up since the last meeting. With inflation above the Fed's 2% target, the majority of FOMC members remain in no rush to make further cuts to the policy rate. 
• Consistent with Chair Powell's data dependent approach, the near carbon-copy FOMC statement relative to June offered little new insight into the potential for a September rate cut. This was intentional to preserve full optionality in the event the real economy notably shifts over the next six-week inter-meeting period. However, with the introduction of two dissenters, the pressure may build for a cut in September should there be any whisper of slippage in the employment or inflation data. Fed futures are currently priced for just 44bps of policy easing by year-end, with the next cut not fully priced until October. Stay tuned, Powell is due to speak at 2:30 PM ET.    

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