The U.S. Federal Reserve (Fed) has kept its benchmark interest rate on hold for the fifth consecutive time, while Chair Jerome Powell noted that it is uncertain whether the Fed will lower the interest rate at the next Federal Open Market Committee (FOMC) meeting.
Powell stated during a press conference after the July FOMC on the 30th (local time) that he has not made any decision regarding the September meeting, adding, "More data will come in by then, and we will make a decision based on that."
Following Powell's remarks, market expectations for a rate cut at the FOMC meeting on September 17 plummeted. According to the Chicago Mercantile Exchange (CME) FedWatch Tool, participants in the U.S. federal funds rate (FF) futures market are reflecting a 44.2% probability of a rate cut at the September FOMC, a sharp drop from 64.6% just a day earlier.
Powell continued to emphasize the need to observe the impact of tariff policies from the Donald Trump administration on prices. He noted, "While inflation has mostly recovered to the target level of around 2%, we need to consider that we are still in the very early stages where tariffs are starting to have an impact."
Powell also mentioned, "While the basic premise is that the impact of tariffs on prices could be temporary, we cannot rule out the possibility that the effects may persist."
Powell appeared to counter President Trump's claims, stating, "The growth rate of the U.S. Gross Domestic Product (GDP) aligns with the Fed's expectations; however, it is still difficult to interpret due to fluctuations in net exports."
Earlier that day, as the U.S. second-quarter GDP growth rate came in at a higher-than-expected 3%, President Trump argued that interest rates should be lowered, to which Powell responded that he would focus on employment and price indicators.
Regarding the opposing views expressed at this FOMC, Powell said, "I should be able to confirm (specific reasons) by tomorrow." Among the 11 FOMC members, 9 supported keeping the rates steady, while Commissioners Michelle Bowman and Christopher Waller suggested a 0.25 percentage point cut. The June FOMC had a unanimous agreement for keeping rates steady. It is reported that this is the first time since 1993 that more than two officials expressed dissenting opinions at an FOMC meeting.
The market expects that the Jackson Hole meeting, scheduled for September 21-23 in Wyoming, will serve as a barometer. The Jackson Hole meeting is a gathering of central bank officials and high-ranking figures from around the world to discuss global economic issues. Powell has outlined monetary policy direction in his speeches at the Jackson Hole meeting.