Market Minute: Fed Not Expected to Move, but FOMC Meeting Still Critical

The FOMC decision on whether to cut rates this month will be announced today. The expectation is for no cut, but markets will be watching Chair Powell’s every word at his presser at 2:30PM ET.

It’s no secret that Powell has been under political pressure to cut rates for months. Tariff impacts are looming ,and rising geopolitical tensions muddy the waters even further for the data-dependent Fed.

Unfortunately, a lot of the data they consider is backwards-looking, leading some financial experts to say the Fed is too slow to respond. The Fed dot plot, where individual members plot their expectations for rates, will be picked apart immediately.

Previously, the FOMC has forecast two rate cuts this year. Already halfway through 2025, markets have repeatedly had to push their expectations to later meetings, and they’re beginning to run out of time. Reuters reports that most expect the Fed to begin their cuts in September.

Any statements on inflation will also be closely-watched as markets gauge how concerned the Fed is about the economy. Typically, central banks increase interest rates as inflation rises, which slows economic activity and thus brings prices down. The last three Consumer Price Index (CPI) readings have come in below expectations as inflation has cooled despite tariff concerns. Fed members have been concerned that tariffs would cause a near-term increase for inflation, but those expectations have not come to fruition at this point.

Tariffs, being a self-imposed inflation boost, work differently from regular inflation. Markets have already been concerned about consumer spending abilities and are on guard for any cracks in the labor market.

Business unease about hiring, the AI disruption, and margin pressures could create an artificially weak labor market just as prices are pushed artificially higher by the tariffs. Cracks in the job market have been increasing with Weekly Jobless Claims and continuing claims increasing, but the unemployment rate remains steadfast at a low 4.2%. With the Fed’s dual mandate of inflation and the jobs market in focus today, all eyes may be on jobs as that may hold the key to any rate cuts this year. The July deadline to end the tariff pause is coming up fast.

The Fed has limited power in this situation, but their words hold significant sway with financial markets and they will begin repricing the latest Fed actions following its interest rate decision at 2:00pm ET, today.