• The Federal Reserve held rates steady at 4.25–4.5%, with Powell refusing to commit to a July cut.
  • Divisions emerge among Fed officials, with some advocating for keeping July options open while others prefer waiting for clearer data.
  • Market expectations shift toward September for the first cut, barring unexpected labor market weakness.

Fed’s Wait-and-See Approach

Federal Reserve Chair Jerome Powell emphasized a cautious, data-dependent stance on potential rate cuts, stating he "can't say whether July is too soon to consider a cut" during recent remarks. The central bank held its benchmark rate at 4.25–4.5% for the fourth consecutive meeting, reflecting ongoing uncertainty about inflation and labor market resilience.

Internal divisions are becoming more apparent, with Governor Michelle Bowman among those pushing to keep a July cut on the table. Others, however, prefer waiting until September unless upcoming employment data shows significant deterioration. "We’re balancing risks on both sides," Powell noted, without elaborating on specific thresholds that would trigger action.

Market Adjusts Expectations

Goldman Sachs and other analysts now see September as the more likely starting point for easing, forecasting two to three 25-basis-point cuts by year-end. Treasury yields dipped slightly following Powell’s comments, though mortgage rates remain stubbornly elevated. Traders are assigning just a 30% probability to a July move, according to futures pricing.

Political pressures linger, with former President Trump publicly criticizing the Fed for not cutting rates sooner. Yet Powell has repeatedly stressed the Fed’s independence, focusing instead on the dual mandate of stable prices and maximum employment. "We don’t react to commentary," a senior Fed official said privately. "The data will dictate our path."

What’s Next?

All eyes turn to the next jobs report—a weaker-than-expected reading could revive July cut speculation. For now, the Fed seems content to let recent tariff-related inflation bumps wash through the system. "These are likely one-off effects," said one market strategist, "but the Fed won’t rush until it’s sure."