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United States: Central Bank leaves rates unchanged in July
Latest bank decision: At its meeting ending on 30 July, the Central Bank decided to maintain the target range for the federal funds rate at 4.25–4.50%, where it has been since last December.
Uncertain outlook and above-target inflation drive hold: The Bank decided to stay put in light of inflation which is still above the 2.0% target despite dipping so far this year, and elevated economic uncertainty under Donald Trump’s presidency as a result of volatile trade policy.
Rate cuts still the base scenario: The Fed’s median projection made in June was for 50 basis points of rate cuts later this year, which is broadly in line with the Consensus among our panelists. Uncertainty over the interest rate outlook is unusually large due to Trump’s unpredictable trade policy and doubts over the effects of this policy on economic activity and inflation.
Panelist insight: On the outlook, United Overseas Bank’s Alvin Liew said:
“Although Chair Powell continues to advocate a wait-and-see approach amidst tariff uncertainty, the tilt towards disagreement by two governors in Jul, alongside a weaker growth assessment, reinforces our view that the Fed will resume its rate cuts. We continue to hold our view of three 25-bps cuts in 2025 to be executed at the Sep, Oct and Dec FOMC meetings. This will bring the FFTR to 3.75% (upper bound) by end-2025.”
In contrast, Nomura analysts are more hawkish:
“We continue to expect the Fed to keep rates on hold until December. Tariffs will likely put upward pressure on inflation data in the months ahead, and without clear signs of labor market stress, we expect policymakers will remain patient about resuming rate cuts.”
