FX.co ★ Fed Expected to Hold Rates Steady

The Federal Reserve is anticipated to keep the federal funds rate unchanged within the 4.25%–4.50% target range for the fifth consecutive meeting in July 2025. This decision reflects a cautious approach in light of rising concerns that the ongoing trade war could undermine progress toward the goal of achieving 2% inflation. Inflation has accelerated for the second consecutive month, reaching 2.7% in June, its highest level since February, compared to 2.4% in May. Core inflation also increased slightly to 2.9%, up from a four-year low of 2.8% the previous month. Though labor market data indicates some deceleration, overall market conditions remain robust. Investors are anticipating a 25 basis point rate cut in September, with potential for up to 100 basis points of easing over the coming year. Concurrently, President Trump is increasing pressure on the Federal Reserve to reduce rates to 1%. His persistent public criticism of the central bank and threats to dismiss Chair Powell have sparked concerns about the potential compromise of the Fed’s independence.