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Fed Holds Rates at 4.25%–4.50%; Markets See 87% Chance of September Cut

Policymakers are preserving rates at multi-decade highs to guard against the inflationary impact of President Trump’s tariffs

Federal Reserve Chairman Jerome Powell walks off after speaking during a news conference following the Federal Open Market Committee meeting, Wednesday, July 30, 2025, in Washington.
Federal Reserve Chairman Jerome Powell.
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Overview

  • The Fed kept its federal funds target at 4.25%–4.50% on July 30 for the fifth pause of 2025 while Governors Christopher Waller and Michelle Bowman dissented in favor of a quarter-point cut.
  • Gross domestic product grew at a 3% annual rate in the second quarter, underscoring persistent economic expansion despite elevated borrowing costs.
  • July’s job report revealed just 73,000 new nonfarm payrolls, lifted unemployment to 4.2%, and saw May–June job gains revised down to a combined 33,000.
  • Odds of a Federal Reserve rate reduction in September jumped to 87% from 38% on Aug. 1 according to the CME FedWatch tool following weaker labor-market data.
  • Chair Jerome Powell reiterated that tariffs remain a key inflation risk delaying rate cuts even as signs of labor-market weakness emerge.