Jake Miller
The Federal Reserve, also known as the Fed, is the central bank of the United States, and it typically holds eight regularly scheduled meetings a year. The Fed's two-day policy meeting started on Tuesday, July 29, 2025, and despite pressure from President Donald Trump, officials are unlikely to cut their influential interest rate. The Fed is expected to keep its key interest rate at 4.25% to 4.5%discourage borrowing and spending and slow down the economy to push inflation down to the Fed's goal of a 2% annual rate. The Fed's next meeting is expected to be held in September 2025, and there is speculation that the Fed will cut interest rates then.
| Characteristics | Values |
|---|---|
| Date of the meeting | 29 July 2025 |
| Duration | Two days |
| Decision | The influential interest rate was not cut |
| Interest rate | 4.25% to 4.5% |
| Next meeting | 16-17 September 2025 |
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What You'll Learn
The Federal Reserve's interest rate
The Federal Reserve, the central bank of the United States, is responsible for providing the nation with a safe, flexible, and stable monetary and financial system. The Federal Open Market Committee (FOMC) holds eight regularly scheduled meetings annually, with other meetings as needed. The minutes of these meetings are released three weeks after the date of the policy decision.
The Fed's influential interest rate is a key aspect of its monetary policy. The FOMC establishes the target rate or range for trading in the federal funds market, which consists of domestic unsecured borrowings in US dollars by depository institutions from other depository institutions and certain other entities, primarily government-sponsored enterprises. The effective federal funds rate (EFFR) is calculated as a volume-weighted median of overnight federal funds transactions reported in the FR 2420 Report of Selected Money Market Rates.
The Fed's influential interest rate has been a topic of discussion at its two-day policy meeting that commenced on Tuesday. The Federal Reserve is widely expected to maintain its key interest rate at 4.25% to 4.5%, the same rate since December. This rate is considered high enough to exert upward pressure on interest rates for various loans. The high rates are intended to discourage borrowing and spending, thereby slowing down economic activity and reducing inflation to the Fed's target of 2% annually.
However, there are differing opinions within the Fed's 12-member policy committee. While two members have indicated their preference for a rate cut this week, the majority are predicted to vote against it, according to the CME Group's FedWatch tool. President Donald Trump has also been advocating for lower interest rates to reduce the federal government's interest payments on the national debt. Nevertheless, Fed officials have resisted these demands, concerned that Trump's tariffs could push inflation higher. The Fed's decision on its key federal funds rate and the subsequent press conference by Fed Chair Jerome Powell will provide insights into the central bank's stance on interest rates for the upcoming months.
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President Trump's pressure to cut rates
The Federal Reserve kicked off its two-day policy meeting on Tuesday, 29 July 2025. The Fed is widely expected to maintain its key interest rate at 4.25% to 4.5%, the same rate since December. Despite this, President Donald Trump has been pressuring the Fed to cut interest rates.
Trump has been vocal about his desire for the Fed to cut interest rates, claiming that he understands monetary policy better than those in charge of setting it. He has argued that lower rates would reduce the federal government's interest payments on the national debt. However, Fed officials have resisted Trump's demands, concerned that his tariff policies could push up inflation.
Trump's pursuit of large-scale tariffs and his plans for mass deportations of undocumented immigrants have raised concerns about reigniting inflationary pressures. Many economists and investors believe that these policies could lead to higher interest rates. Fed officials have expressed caution about lowering rates further, as inflation is still above the Fed's 2% target.
Trump's criticism of the Fed and his calls for lower interest rates come at a time when the economic outlook is uncertain. Powell, the Fed Chairman, has acknowledged the uncertainty surrounding the Trump administration's policy changes and their potential impact on the economy. The Fed's decision to maintain interest rates is consistent with its mandate to focus on economic considerations rather than political influences.
Trump's pressure on the Fed to cut rates has raised questions about the central bank's independence. The Fed is expected to make policy decisions based on economic factors, but Trump's demands have introduced a political element to the discussion. Despite Trump's assertions, the Fed's rate decisions will continue to be driven by economic data and the mandate to maintain price stability.
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Jerome Powell's press conference
The US Federal Reserve's two-day monetary policy meeting commenced on Tuesday, with financial markets eagerly awaiting any indication of the central bank's plans regarding interest rate cuts in the upcoming months. The Federal Open Market Committee (FOMC) is deliberating on monetary policy and is scheduled to announce its decision regarding the federal funds rate on Wednesday at 2 pm Eastern Time. Following this announcement, Fed Chair Jerome Powell is expected to hold a press conference at 2:30 pm.
During the press conference, Jerome Powell will address journalists and provide an update on the FOMC's policy statement and any decisions made during the two-day meeting. He is likely to emphasise the factors considered in their deliberations, including economic indicators, market trends, and the overall health of the US economy. Powell may also field questions regarding the potential impact of Trump's tariffs and the Fed's independence in making policy decisions.
Powell's choice of words and tone during the press conference will be carefully analysed by market participants, as they can significantly influence financial markets and economic expectations. Investors and analysts will be seeking clarity on the Fed's outlook for the remainder of the year and beyond. Any hints about future rate cuts or changes in monetary policy will be closely scrutinised, potentially impacting stock markets, bond yields, and the value of the US dollar.
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The Fed's monetary policy
The Federal Reserve, the central bank of the United States, is responsible for providing the nation with a safe, flexible, and stable monetary and financial system. The Federal Open Market Committee (FOMC) holds eight regularly scheduled meetings per year, with other meetings as needed. The FOMC makes an annual report pursuant to the Freedom of Information Act.
Monetary policy refers to the Federal Reserve's actions and communications to promote maximum employment, stable prices, and moderate long-term interest rates. The Fed sets a target range for the federal funds rate, which is the interest rate at which banks borrow and lend to each other overnight. While the federal funds rate does not directly affect most firms and households, monetary policy influences the broader economy by impacting financial conditions, including longer-term interest rates, the exchange value of the dollar, and the prices of key assets such as equities and real estate.
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The Fed's next meeting in September
The Federal Reserve, the central bank of the United States, is expected to hold its next meeting on 16-17 September 2025. This will be the first meeting after a two-month break, during which Fed watchers will have been able to gain insights from the Kansas City Fed’s Jackson Hole Economic Policy Symposium.
US Treasury Secretary Scott Bessent has called for a half-point interest rate reduction at the September meeting. This would be the first rate cut since December 2024, with the Federal Reserve keeping rates at 4.25% to 4.5% during the five subsequent meetings. The Fed's key interest rate is designed to be high enough to put upward pressure on interest rates for loans, discouraging borrowing and spending to slow down the economy and push inflation down to an annual rate of 2%.
Despite pressure from President Donald Trump to cut rates, Fed officials have resisted doing so. They argue that Trump's tariff policy will not push up inflation and prefer to wait to monitor the impact of his economic agenda before making any changes. However, two members of the Fed's 12-member policy committee have signalled they would favour a rate cut.
The Fed's September meeting will be pivotal in terms of its way forward for monetary policy. It is widely expected to cut its key overnight lending rate at least once, if not twice, this year.
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Frequently asked questions
The Federal Reserve isn't expected to lower its influential interest rate this week. The Fed's two-day policy meeting kicked off on Tuesday, 29 July 2025.
The Fed is widely expected to keep its key interest rate at 4.25% to 4.5%, the same as it has been since December.
The Federal Reserve, the central bank of the United States, provides the nation with a safe, flexible, and stable monetary and financial system.
