Fed Holds Rates Steady Amid Calls for Cut and Hints at September Move

The Federal Reserve maintained its benchmark interest rate within the 4.25%-4.50% range during its July 2025 meeting, continuing a five-session pause in rate adjustments [1][2][3]. This decision, largely in line with market expectations, came despite persistent calls for a rate cut from U.S. President Donald Trump, who has argued that lower borrowing costs would bolster economic growth [1][4]. The central bank, led by Chair Jerome Powell, emphasized a cautious approach, with no firm commitment on the September meeting's direction [5].

The Federal Open Market Committee (FOMC) voted to keep rates unchanged in a 9-2 decision, with two members dissenting in favor of a 25-basis-point reduction [6]. The updated language in the Fed's statement reflected a moderation in economic growth during the first half of 2025 but did not indicate rising inflation risks. The statement noted that “growth of economic activity moderated in the first half of the year,” a shift from earlier wording [5].

Analysts suggest the likelihood of a September rate cut is higher than the current futures market implies. While futures markets estimate a 40% probability of a cut, Morningstar analysts place the odds closer to two-thirds [5]. This discrepancy underscores the uncertainty surrounding the Fed’s next move. During the press conference, Powell adopted a more hawkish tone than the statement itself, highlighting ongoing inflation risks and the stability of the labor market [5].

Inflation remains a key concern for the Fed. Core PCE inflation is expected to remain at 2.8% year-over-year as of June 2025, unchanged from the 2024 average [5]. Powell acknowledged that while companies currently absorb the costs of tariffs, consumer prices are likely to rise as those costs are passed on. The central bank’s long-run projection for the federal funds rate stands at 3.0%, significantly lower than the current 4.25%-4.50% range [5].

The June FOMC projections outlined expectations for two rate cuts in the remainder of 2025, and with only three meetings remaining, a September move remains a strong possibility [5]. However, Powell’s reluctance to commit, combined with the hawkish tone of his comments, suggests that any rate cut will likely be modest and conditional on incoming data.

The current interest rate level remains above the pre-pandemic average of 1.7% and is considered “moderately restrictive” by the Fed. While most economists view the neutral rate as lower than the current level, the central bank appears hesitant to act without stronger evidence of inflationary moderation and labor market cooling [5].

The decision to hold rates steady has had a cautious effect on financial markets. High-risk assets, particularly cryptocurrencies such as Bitcoin and Ethereum, may benefit from renewed investor interest as capital flows toward risk-on assets [3]. Historical patterns suggest that stable interest rate environments often lead to inflows into digital currencies, potentially supporting a short-term rally in the sector [3].

Sources:

[1] Reuters, [https://www.reuters.com/business/fed-keeps-rates-steady-despite-trumps-pressure-with-two-governors-dissenting-2025-07-30/](https://www.reuters.com/business/fed-keeps-rates-steady-despite-trumps-pressure-with-two-governors-dissenting-2025-07-30/)

[2] Morningstar, [https://www.morningstar.com/news/dow-jones/202507317518/fed-holds-rates-steady-but-two-officials-back-a-cut](https://www.morningstar.com/news/dow-jones/202507317518/fed-holds-rates-steady-but-two-officials-back-a-cut)

[3] CNBC, [https://www.cnbc.com/2025/07/30/fed-meeting-live-updates.html](https://www.cnbc.com/2025/07/30/fed-meeting-live-updates.html)

[4] Yahoo Finance, [https://finance.yahoo.com/news/fed-holds-steady-two-dissenters-183253231.html](https://finance.yahoo.com/news/fed-holds-steady-two-dissenters-183253231.html)

[5] Morningstar, [https://www.morningstar.com/economy/fed-tees-up-september-rate-cut-will-it-happen](https://www.morningstar.com/economy/fed-tees-up-september-rate-cut-will-it-happen)

[6] Yahoo Finance, [https://finance.yahoo.com/news/wall-street-reactions-as-federal-reserve-holds-interest-rates-steady-190442603.html](https://finance.yahoo.com/news/wall-street-reactions-as-federal-reserve-holds-interest-rates-steady-190442603.html)