Powell poured cold water on the Fed's September rate cut at the press conference: Five key takeaways
2025-08-01 18:48
Here are five key takeaways from Wednesday's Federal Open Market Committee (FOMC) interest rate decision and Fed Chair Jerome Powell's press conference:
1. The statement reiterated that inflation remains high and uncertainty about the economic outlook persists.
The Fed held interest rates steady for five consecutive meetings, maintaining the federal funds rate in the range of 4.25% to 4.5%, as expected by the market. The statement reiterated that inflation remains high and uncertainty about the economic outlook persists.
2. Two board members advocated for a rate cut at this meeting
Two Fed governors, Waller and Bowman, dissented in favor of a rate cut at this meeting. This was the first time since 1993 that two Fed governors dissented.
3. Powell poured cold water on the September rate cut
At the post-meeting press conference, Powell did not directly address the question of whether a rate cut would occur in September. He stated that the decision would depend on economic data, and that a majority of members currently believed that maintaining a "moderately tight" policy stance was reasonable. Market expectations for a September rate cut have significantly cooled, falling from over 60% on Tuesday to below 50%.
4. The impact of tariffs remains to be seen
While the outlook for tariffs is becoming clearer, Powell noted that progress remains to be seen. He said the Fed's decision not to raise interest rates this time, to some extent, represents a decision to ignore some of the effects of tariffs. He also repeatedly noted that prices for some goods have indeed risen.
5. Rate cut announcements failed to materialize, stocks and bonds fell, and the US dollar strengthened
Wall Street had hoped the Federal Reserve would signal an impending rate cut on Wednesday, but after expectations were dashed, U.S. Treasuries and stocks fell, and the dollar strengthened. The S&P 500 fell 0.1% to 6,362.9, the Dow Jones Industrial Average fell 0.4% to 44,461.28, and the Nasdaq Composite rose 0.1% to 21,129.67. The U.S. two-year bond yield rose 7 basis points to 3.94%, and the U.S. dollar index (DXY) rose 1.1%.