On July 30-31, the Federal Reserve held its fifth interest rate policy meeting of 2025. Chairman Jerome Powell announced that rates will remain unchanged and stay steady at 4.25% to 4.50%.
The labor market is showing to be softening up with the unemployment rate edging lower in June with a rate of 4.7%.This supports the Fed's patient stance as they balance employment with inflation concerns. However, inflation remains elevated.
The latest Consumer Price Index (CPI) report showed year-over-year inflation rising to 2.7% in June, up from 2.4% in the previous month. Additionally, core inflation, which excludes food and energy prices, ticked up to 2.9%. The increase is widely attributed to recent tariff policies, which have begun to affect a broad range of consumer goods. According to Jeffrey Roach, chief economist for LPL Financial, “Although the President has called for rate cuts, the Fed will likely stand pat until inflation pressures abate."
By holding rates steady, the Fed keeps its options open. Chairman Powell emphasized forthcoming CPI releases for July and August must be reviewed to gauge the tariff impact fully. If inflation begins retreating toward the 2% target and labor slack increases, a rate cut may be on the table for later in 2025.
To understand how the Federal Reserve's interest rate decisions impact you, click below:
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