Fed Holds 5.25% Rate as Core PCE and Labor Data Set for July 25-26 Release, U.S.-China Trade Talks Loom

Next week’s macroeconomic calendar is set to dominate global financial markets, with the Federal Reserve’s policy decision, key labor and inflation data, and U.S.-China trade discussions forming the core of investor focus. The Fed’s July 25 meeting will determine whether the 5.25% benchmark rate remains unchanged, as recent inflation and employment data have tempered expectations for immediate rate cuts [3]. Concurrently, the June core PCE price index, due for release on Thursday, is forecast to hold steady at 2.70% year-over-year, matching the prior month’s figure, offering a critical gauge of inflationary pressures [2]. Meanwhile, the July nonfarm payrolls report, scheduled for July 26, is anticipated to show 10,200 new jobs, a decline from the 14,700 added in June, signaling potential softness in the labor market [4].

The interplay between these data points will shape the Fed’s communication strategy. FXStreet analysts suggest that while the central bank may refrain from cutting rates in the near term, the foundation for future easing could still be laid if employment and inflation trends remain mixed [3]. A stronger-than-expected NFP report might delay the first rate cut until late 2025, whereas weaker outcomes could prompt an earlier shift in policy [4]. The core PCE data, however, may temper aggressive dovish expectations, as a 0.3% monthly increase aligns with current forecasts but underscores the need for continued vigilance against inflationary drifts [2].

Global market participants will also monitor the U.S.-China trade negotiations, scheduled for July 24-30, as discussions on tariffs and trade imbalances could influence supply chains and inflationary dynamics. While specific outcomes remain undisclosed, unresolved disputes may prolong uncertainties for cross-border trade-dependent sectors. The timing of these talks—coinciding with key economic data releases—highlights the overlapping risks of monetary policy adjustments and geopolitical tensions [1].

Domestically, Hong Kong’s implementation of its "Stablecoin Regulation" on July 26 adds another layer of regulatory scrutiny, though its immediate market impact remains to be seen. Meanwhile, the July ISM Manufacturing PMI and University of Michigan Consumer Sentiment Index will provide further insights into economic momentum, with forecasts pointing to a slight contraction in manufacturing activity (49.6) and modest consumer confidence (61.8).

Investors are advised to remain cautious as the week’s events could trigger heightened volatility in bond yields, equities, and foreign exchange markets. The Fed’s communication, particularly during Powell’s post-meeting press conference, will be pivotal in calibrating expectations for future rate adjustments. Given the interdependence of inflation, employment, and trade dynamics, the outcomes of these developments may not only dictate short-term market movements but also recalibrate the trajectory of global economic policy.

Source: [1] [Week Ahead: Trade Talks, Fed and BoJ Decisions, Tariff Deadline](https://www.investing.com/analysis/week-ahead-trade-talks-fed-and-boj-decisions-tariff-deadline-us-jobs-data-200664343) [2] [Macro Expectations Are Relatively Positive, But the Improvement in Fundamentals Is Limited](https://news.metal.com/newscontent/103448113/Macro-expectations-are-relatively-positive-but-the-improvement-in-fundamentals-is-limited-Lead-prices-may-fluctuate-at-highs-[SMM-Weekly-Lead-Market-Forecast]) [3] [Federal Reserve Preview: Fed to Hold the Line, But Cuts Are Coming](https://www.fxstreet.com/analysis/federal-reserve-preview-fed-to-hold-the-line-but-cuts-are-coming-202507251219) [4] [FX Weekly](https://www.mufgresearch.com/fx/fx-weekly-25-july-2025/).