30 July 2025
If you are covering the Federal Reserve’s decision to hold interest rates, please find below a comment from Richard Carter, head of fixed interest research at Quilter Cheviot:
“Even after his visit to check in on the Federal Reserve’s renovation, Donald Trump continues to be defied in his quest to get interest rates cut. The Fed has held rates at 4.25%-4.5% and show no sign of cutting for now. Tariffs continue to leave an uncertain picture for the US economy and with Friday’s deadline for any final ‘trade deals’ looming, what the end trading relationship looks like between the US and the rest of the world is unclear.
“Ultimately, the data coming out of the US continues to vindicate the Fed’s position. Although somewhat distorted, GDP for Q2 came in at a better than expected 3%, while inflation is on an overall downward trajectory. The US jobs market, too, continues to hold up in the face of pressures instigated from Donald Trump’s tariff announcements. The problem for Trump is that he wants both a strong economy and low interest rates, but right now it looks like he can’t have both.
“Eyes will now turn to September’s meeting given the slightly more dovish tones emanating from the Federal Reserve in the past month or so. Jerome Powell will not want to be seen to be appeasing Donald Trump and will want the Fed to maintain its independence. It is a difficult position for the Fed to be in and as such retreating into wait and see mode will be the favourable approach. But if inflation continues to remain under control and cracks begin to appear in the labour market, the Fed will need to be prepared to act quickly, yet continue to block out the noise from Donald Trump.”
