Federal Reserve set to hold interest rates steady as attention goes to September decision
The United States (US) Federal Reserve (Fed) will announce its interest rate decision and publish the policy statement following the July policy meeting on Wednesday.
Market participants widely anticipate the US central bank will leave policy settings unchanged for the fifth consecutive meeting after cutting the interest rate by 25 basis points (bps) to the 4.25%-4.50% range last December.
The CME FedWatch Tool shows that investors virtually see no chance of a rate cut in July, while pricing in about a 64% probability of a 25 bps reduction in September. This market positioning suggests that the US Dollar faces a two-way risk heading into the event.
The revised Summary of Economic Projections (SEP), published in June, showed that policymakers’ projections implied 50 bps of rate cuts in 2025, followed by 25 bps reduction in both 2026 and 2027. Seven of 19 Fed officials pencilled in no cuts in 2025, two of them saw one cut, while eight of them projected two and two of them forecast three cuts this year.
Following the June meeting, Fed Governor Christopher Waller voiced his support for a July rate cut in his public appearances, arguing that they should not wait until the labor market is in trouble before easing the policy. Similarly, Fed Governor Michelle Bowman said that she is open to cutting rates as soon as July since inflation pressures remain contained. Meanwhile, United States (US) President Donald Trump extended his attempts to pressure the US central bank into cutting interest rates in July. While addressing reporters alongside British Prime Minister Keir Starmer on Monday, Trump reiterated that the US economy could be doing better if the Fed were to cut rates.
Previewing the Fed meeting, “the FOMC is again widely expected to keep its policy stance unchanged next week, with the Committee maintaining rates at 4.25%-4.50%,” noted analysts at TD Securities. “We expect Powell to repeat his patient, data-dependent policy stance while maintaining flexibility around the Committee's next move in September. We believe two dissents, from Governors Bowman and Waller, are likely at this meeting.”
Source : Fxstreet
