US Fed: Jerome Powell-led FOMC holds key interest rates unchanged despite Trump's rate cut pressures
The July 2025 policy outcome marked the fifth consecutive time that the US central bank has decided to hold the lending rates since January 2025. Ever since US President Donald Trump took over the White House, the administration has been asking for a rate cut. However, the Fed seems to have a different plan mapped out for the nation.
1. Rates Held Unchanged: The July 2025 US Fed meeting outcome kept the interest rates unchanged at 4.25 to 4.5%, as the central bank positioned itself to review more economic data before cutting them.
'The Committee decided to maintain the target range for the federal funds rate at 4-¼ to 4-½%. In considering the extent and timing of additional adjustments to the target range for the federal funds rate,' said the FOMC.
The US Fed also cited that the country's inflation still remains at a 'somewhat elevated' level, but the unemployment rate remains low, with solid labour market conditions.
The Jerome Powell-led FOMC also highlighted that the indicators suggest that economic activity's growth moderated in the first half of the year. 'GDP rose at a 1.2% pace in the first half of this year, down from 2.5%,' said Powell in his address to the media.
2. Inflation Risks: The risk of inflation remains looming over the US economy, as the Fed's FOMC committee also highlighted concerns of a 'somewhat elevated' inflation data.
However, the US Federal Reserve reiterated its intentions to bring down the inflation rate to its 2% target while supporting maximum employment in the nation.
'The Committee is strongly committed to supporting maximum employment and returning inflation to its 2% objective,' said the US Fed's FOMC.
The US Bureau of Labor Statistics data showed that the US CPI inflation for the 12-month period ending June 2025 was at 2.7%, compared to 2.4% in May 2025, with the price of certain goods fueling the inflation rise in the nation.
According to the official data release, the prices of meat, poultry, and fish jumped 3.8%, while the cost of eggs jumped 27.3%.
3. Tariff-related Price Push: Fed Chair Powell also said that inflation has continued to ease in the US economy, while the increased tariff rates are pushing up prices in some categories of goods. Jerome Powell's words come days ahead of US President Donald Trump's 1 August tariff deadline for imposing import duties on the world's nations.
'Near-term measures of inflation expectations have moved up, on balance, over the course of this year, on news about tariffs as reflected in both market-based and survey-based measures beyond the next year or so. However, most measures of longer-term expectations remain consistent with our 2% inflation,' said US Fed Chairman Jerome Powell.
Powell also later mentioned during the press address that he thinks inflation is 'most of the way back to 2%,' highlighting how the composition of inflation in the economy has changed over time.
4. 'Modestly Restrictive' Policy Stance: Fed Chair Jerome Powell categorised the FOMC's current policy stance as 'modestly restrictive,' with the nation's inflation 'a bit' above 2%.
'I would characterise it as modestly restrictive. Inflation is running a bit above 2% as I mentioned, even excluding tariff effects, the labour market's solid, historically low,' said Jerome Powell.
Powell also highlighted that the unemployment and financial conditions are in an 'accommodative' position in the economy.
'So it seems to me and to almost the whole committee that the economy is not performing as a restrictive policy is holding it back inappropriately, and a modestly restrictive policy seems appropriate,' he said.
5. Economic uncertainty situation: In the June 2025 policy announcement, the committee and Powell both agreed that the uncertainties have diminished from their earlier levels, yet they remain elevated in the current market.
However, in the July 2025 policy meeting outcome, the FOMC did not mention the diminishing uncertainty, to which Powell said that the uncertainty was even in the economy at this this.
'So at the time of the last meeting, uncertainty had moved down a little bit, but it was more or less even this time. So we took out, you know, had diminished, because it didn't diminish further,' said Powell, responding to a question on the diminishing uncertainty in the US economy.
Read all stories by Anubhav Mukherjee
Disclaimer: This story is for educational purposes only. The views and recommendations made above are those of individual analysts or broking companies, and not of Mint. We advise investors to check with certified experts before making any investment decisions.
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