Fed Maintains Rates in July Amid Trump Pressure, Markets Eye September Cut Chance

The U.S. Federal Reserve is expected to maintain its benchmark interest rate at its July 2025 meeting, despite persistent pressure from President Donald Trump, who has repeatedly urged for rate cuts to stimulate economic activity. Trump has criticized Fed Chair Jerome Powell for not lowering rates promptly, arguing that high interest rates are harming consumers, particularly those seeking to buy homes [1]. In a recent post on Truth Social, the president stated that Powell is “too late” and should “lower the rate now,” further intensifying the public debate over monetary policy [2].

According to the CME FedWatch tool, traders are currently assigning a 59.8% probability to a 25 basis point rate cut in September, reflecting growing confidence that the Fed may respond to the recent 3% annualized GDP growth in the second quarter [3]. This potential shift underscores the evolving dynamics between economic performance and policy response.

White House economic adviser Kevin Hassett has supported the idea that the economy is now in a position to tolerate a rate reduction, arguing that the markets are surprised by the Fed’s hesitation [4]. However, Powell has maintained a cautious stance, citing concerns that Trump’s recent tariffs could complicate the Fed’s inflation target of 2%. The central bank has emphasized the need to carefully evaluate the full impact of these policies before deciding on any rate cuts [5].

Some analysts have highlighted the difficult balancing act the Fed faces—ensuring price stability while supporting employment and economic growth. Although the economy appears resilient, driven in part by reduced imports under Trump’s trade policies, underlying trends suggest a slowing pace of growth [6]. This has led to calls for the Fed to show “a little bit of imagination” in its decision-making, as U.S. Treasury Secretary Scott Bessent noted, though he did not anticipate a rate cut this week [7].

The central bank’s next steps will be closely watched, especially during Powell’s press conference, where any indications of a September cut could significantly influence market sentiment. Meanwhile, the Bank of Canada’s recent decision to hold rates steady has added another layer of uncertainty, as it navigates the implications of U.S. trade policies [8].

The ongoing tension between political pressure and the Fed’s independence continues to dominate the discourse. Trump’s repeated demands for immediate action contrast sharply with the Fed’s measured and data-driven approach. As the economy moves forward, the Fed’s decisions will play a crucial role in shaping the path of interest rates and inflation in the months ahead [9].

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Sources:

[1] https://www.npr.org/2025/07/30/nx-s1-5483961/federal-reserve-interest-rates-trump-pressure

[2] https://www.foxbusiness.com/politics/fed-meeting-looms-trump-celebrates-3-gdp-growth-pushes-rate-cuts

[3] https://www.foxbusiness.com/economy/powell-fed-cut-rates-response-trumps-pressure

[4] https://www.telegraph.co.uk/business/2025/07/30/us-economy-surges-in-boost-for-trump/

[5] https://www.bankrate.com/banking/federal-reserve/trump-pressures-fed-for-rate-cut-fomc-meeting-live-updates-july-30-2025/

[8] https://www.wunc.org/2025-07-30/trump-keeps-pressuring-the-fed-to-cut-rates-heres-why-its-independence-matters