Fed Maintains 4.25–4.50% Rate Range with 97.4% Probability of No July Cut as Inflation Constrains Easing

The Federal Reserve’s July 29–30 policy meeting has become a focal point for investors, with CME Group’s FedWatch tool indicating a 97.4% probability of unchanged rates and only a 2.6% chance of a 25 basis point rate cut [1]. This aligns with the central bank’s recent decision to maintain the Federal Funds Rate in a 4.25–4.50% target range on June 18, 2025, following a unanimous vote by the Board of Governors [2]. Market pricing in Fed Funds futures suggests prolonged caution, with the likelihood of a rate cut delayed until September at 37.9%, a cumulative 25 basis point reduction by year-end at 60.5%, and a 50 basis point cut at 1.6% [1]. The low probability of easing reflects the Fed’s prioritization of inflation control despite external pressures, including President Trump’s public advocacy for lower rates [4].

Recent economic data has complicated the case for immediate monetary easing. Inflation rose in June, according to government reports, reinforcing the Fed’s stance that accommodative policy risks undermining price stability [5]. Analysts at ANZ anticipate policy normalization later in 2025, forecasting a 25 bps cut in September and December, but the July meeting remains unlikely to deviate from the current trajectory [3]. This underscores the Fed’s data-dependent approach, with policymakers emphasizing the need for stronger evidence of cooling price pressures before committing to rate cuts. The central bank’s communication strategy will play a pivotal role in shaping market expectations ahead of the September 17 meeting.

Financial markets have priced in approximately 1.7 quarter-point rate cuts by year-end, yet the 2.6% probability of a July cut reinforces the near-certainty of a rate-holding stance [6]. This outcome would extend the Fed’s pause in easing, signaling that inflation remains a primary constraint on accommodative policy. While Trump’s recent visit to the Federal Reserve and repeated calls for rate reductions have drawn attention, the central bank’s focus on maintaining price stability appears to outweigh political pressures.

The implications for asset markets are mixed. Nasdaq futures have risen on optimism about corporate earnings and trade negotiations, yet the low likelihood of immediate Fed action suggests volatility in bond yields and equity indices may persist until the September decision [1]. Investors must balance the prospect of delayed easing with the central bank’s commitment to transparency. The Fed’s September meeting will likely remain the key event for policy normalization, with subsequent guidance critical for recalibrating market expectations.

Sources:

[1] [Nasdaq Futures Climb on Upbeat Alphabet Results](https://www.archercoopgrain.com/news/story/33609525/nasdaq-futures-climb-on-upbeat-alphabet-results-and-trade-deal-optimism-u-s-pmi-data-in-focus)

[2] [IC Markets Asia Fundamental Forecast | 25 July 2025](https://www.icmarkets.com/blog/ic-markets-asia-fundamental-forecast-25-july-2025/)

[3] [Dollar steadies as focus shifts to Fed, BOJ meetings](https://www.globalbankingandfinance.com/GLOBAL-FOREX-a6ff301a-5eb9-44b5-b50b-f747bf77fe88)

[4] [Donald Trump Visits FED, Says 'We Should Be Like...'](https://coinpedia.org/news/donald-trump-visits-fed-says-we-should-be-like-switzerland-on-interest-rates/)

[5] [Inflation accelerates in June as investors eye tariff-related...](https://www.aol.com/finance/june-inflation-expected-show-tariff-174837585.html)

[6] [Market Update – July 2025 | RGWM Insights](https://rgwealth.com/market-thoughts/market-update-july-2025/)