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FOMC Holds Rates Steady Amid Elevated Economic Uncertainty Thumbnail

FOMC Holds Rates Steady Amid Elevated Economic Uncertainty

Insights Investing

By Tyler Q. Breder, CFP ®

On July 30, 2025, the Federal Open Market Committee (FOMC), for the fifth consecutive meeting, voted 9–2 to keep overnight borrowing rates unchanged at 4.25–4.5%. This means that, until the next scheduled vote in September interest rates will remain at their current level. Notably, two FOMC members dissented in the vote, along with one abstention, marking the first time since 1993 that multiple committee members voted against the majority during a vote.

Fed Signals Heightened Uncertainty

In remarks following the announcement, Federal Reserve Chair Jerome Powell cited uncertainty around economic policy as a primary factor behind the committee’s decision. However, the official statement released by the FOMC showed a noticeable shift in tone from the June version, signaling a more cautious outlook.

According to an analysis by CNBC,[1] several lines in the July statement were notably less optimistic. A few examples include:

1. Regarding Economic Activity

  • June Statement: “…recent indicators suggest that economic activity has continued to expand at a solid pace.”
  • July Statement: “…recent indicators suggest that growth of economic activity moderated in the first half of the year.”

2. In Reference to Economic Outlook

  • June Statement: “…uncertainty about the economic outlook has diminished.”
  • July Statement: “…uncertainty about the economic outlook remains elevated.”

While interpretations may vary, these changes suggest a shift toward greater caution in policy positioning. This may have been influenced by the slight uptick in inflation from June to July, reversing the downward trend seen year-to-date.

Outlook for September and Market Reaction

Chair Powell offered little indication of whether the committee might lower rates in September. Notably, pressure from the Trump Administration to reduce interest rates appears to have had minimal impact on the Fed’s decisions.

Arguments in favor of a rate cut include:

  • GDP growth reportedly running at a 3% annualized rate
  • Inflation, while rising modestly, still hovering near the Fed’s 2% target

In response to the July announcement, markets moved moderately lower, reflecting investor caution. However, expectations remain high for a potential rate cut in September. If the Fed holds steady again, further market turbulence could follow.

 

[1] https://www.cnbc.com/2025/07/30/july-fed-meeting-heres-what-changed-in-the-new-statement.html