Research
July 30, 2025
Monetary Policy
Federal Reserve Held Short-Term Interest Rates Steady in July
As widely expected, the Federal Open Market Committee (FOMC) left short-term interest rates unchanged at their July meeting. By a vote of 9 to 2, the committee decided to hold their target range for the federal funds rate at 4.25%-4.5%. The 2 dissenting governors called for a quarter-point rate cut at this meeting.
While this marked the first time since 1993 that there were 2 dissenting votes at an FOMC meeting, the decision was in line with market expectations.
The market also expects that the FOMC will begin cutting rates at their September meeting, assuming no surprises in the data. The FOMC’s most recent Summary of Economic Projections – released at its June meeting – also pointed toward two rate cuts in 2025.
The FOMC has held interest rates steady since December 2024, largely because of the uncertainty around tariffs and their impact on inflation. With the labor market remaining resilient and operating near full employment, they felt comfortable taking a wait-and-see stance and letting the incoming data guide their decisions.
That approach was reinforced by the fact that core inflation remained elevated above their 2% target, despite significant cooling from their pandemic-era highs.
While the overall economy continues to grow, some cracks are beginning to show – particularly in interest rate-sensitive sectors. This potentially increases the likelihood that the FOMC will resume easing of monetary policy at its September meeting.
While this marked the first time since 1993 that there were 2 dissenting votes at an FOMC meeting, the decision was in line with market expectations.
The market also expects that the FOMC will begin cutting rates at their September meeting, assuming no surprises in the data. The FOMC’s most recent Summary of Economic Projections – released at its June meeting – also pointed toward two rate cuts in 2025.
The FOMC has held interest rates steady since December 2024, largely because of the uncertainty around tariffs and their impact on inflation. With the labor market remaining resilient and operating near full employment, they felt comfortable taking a wait-and-see stance and letting the incoming data guide their decisions.
That approach was reinforced by the fact that core inflation remained elevated above their 2% target, despite significant cooling from their pandemic-era highs.
While the overall economy continues to grow, some cracks are beginning to show – particularly in interest rate-sensitive sectors. This potentially increases the likelihood that the FOMC will resume easing of monetary policy at its September meeting.