The Federal Reserve is expected to hold the federal funds rate steady at the 4.25%–4.50% target range for a fifth consecutive meeting in July 2025, maintaining its wait-and-see approach amid growing concerns that the ongoing trade war could reverse progress toward the 2% inflation target. The annual inflation rate accelerated for the second straight month to 2.7% in June—the highest since February—up from 2.4% in May.
Core inflation also edged higher, reaching 2.9% from a four-year low of 2.8% in the previous month. Meanwhile, labor market data continues to reflect a slowdown, but overall conditions remain robust. Investors are still pricing in a 25bps rate cut in September, with expectations of up to 100bps of easing over the next 12 months. At the same time, President Trump has been intensifying pressure on the Fed to cut rates to 1%. His repeated public criticism of the central bank and threats to dismiss Chair Powell have raised concerns about the erosion of the Fed’s independence.
