Fed Holds Rates Steady Defying Cuts Hints at Future Hike

The U.S. Federal Reserve maintained the federal funds rate within the range of 4.25% to 4.5% at its latest meeting, defying expectations for a cut and even hinting that a rate hike could be on the table in the future. Federal Reserve Chair Jerome Powell emphasized the need for more economic data before making any policy adjustments, despite rising inflation linked to tariffs and growing dissent within the Federal Open Market Committee (FOMC) [1]. Two FOMC members dissented from the decision, marking the highest level of internal disagreement in over 30 years [1].

Powell struck a notably cautious tone, stating that the FOMC is “looking through” tariff-driven inflation without raising rates. He argued that while higher tariffs have begun to influence goods prices, their broader economic and inflationary impacts remain uncertain [1]. This stance was described by Bank of America’s macroeconomics team as “more hawkish than expected,” with Powell making it clear that the burden of proof for a rate cut will lie with the incoming data [1].

In the wake of the decision, equity markets declined and Treasury yields rose, reflecting investor concern over the Fed’s reluctance to ease policy. UBS analyst Paul Donovan suggested that market participants are skeptical of the dissenting FOMC members, viewing their positions as politically motivated rather than purely economic [1]. Meanwhile, Goldman Sachs’s David Mericle noted that Powell avoided giving direct signals on a September rate cut, though he did not rule it out entirely [1].

Analysts remain divided on the timing of the next rate cut. While Powell did not endorse the “two-cut baseline” suggested in the June FOMC projections, he acknowledged that a cut could still be possible depending on incoming data. Goldman Sachs continues to forecast three rate cuts in 2025—scheduled for September, October, and December—followed by two more in 2026 to bring the rate down to 3% to 3.25% [1]. J.P. Morgan’s Elyse Ausenbaugh noted that while a September cut is not imminent, economic conditions could change before the next FOMC meeting, leaving the door open for policy easing [1].

UBS’s Mark Haefele pointed to weakening labor market indicators, such as declines in job openings and hires, as supporting the case for a September cut. The Conference Board also reported that 18.9% of respondents in July found jobs hard to get, suggesting that labor market pressures may be building [1]. Despite these signals, Powell reiterated that the economy does not appear to be held back by current policy, reinforcing the central bank’s wait-and-see approach [1].

Source: [1] [Powell didn’t just refuse to deliver a rate cut—he also hinted a raise could have been on the cards](https://fortune.com/2025/07/31/powell-rate-cut-raise-fomc-market-reaction-september-plan/)