US Interest Rate Prep (Wednesday 30th July)

The forecast is to keep rate unchanged at 4.5%. No Summary of Economic Projections is expected

Previous Rate Statement June 18th
Although swings in net exports have affected the data, recent indicators suggest that economic activity has continued to expand at a solid pace. The unemployment rate remains low, and labor market conditions remain solid. Inflation remains somewhat elevated.

In assessing the appropriate stance of monetary policy, the Committee will continue to monitor the implications of incoming information for the economic outlook. The Committee would be prepared to adjust the stance of monetary policy as appropriate if risks emerge that could impede the attainment of the Committee’s goals.

Previous FOMC SEP

Investment Bank Views
ANZ
We expect no change to the rate at the FOMC’s July meeting. Labour market conditions are close to full employment and the unemployment rate has been relatively stable between 4.0% and 4.2% over the past year. This has allowed the Fed to focus on price stability and patiently watch inflation data for signs that higher tariffs are leading to a persistent rise in pressures.
FOMC governors Bowman and Waller have publicly stated they support a July rate cut, so a decision to hold is unlikely to be unanimous. In the past year there have been two separate indications of dissents from governors: Bowman in September 2024 and Waller in March 2025. Unlike this time, however, their previous dissents were hawkish. The last dissenting vote by a governor was in 2005 and before that was in the early 1990s when two governors dissented at the same meeting. From inter-meeting communications we know that, owing to elevated inflation uncertainty from tariffs, most voting members of the FOMC want to see more data over the northern summer before considering changes to monetary policy.
We will be looking for some tweaks to the language in the FOMC statement alongside any comments from Powell that signal the September meeting is live for a rate cut: for example, if he acknowledges the labour market is cooling or that there is room to support the labour market.
On the inflation side, if Powell focuses on the trend disinflation in services it might be interpreted as a sign there is less concern about a negative spillover from tariffs to broader inflation outside of goods. If no signals come out of this meeting, Powell could later flag a shift to a resumption of rate normalisation at the 21-23 August Jackson Hole symposium. At that time, he will have more inflation and jobs data as well as a resolution to where reciprocal tariff rates might land, given the 1 August deadline.

ING
The market is currently pricing virtually zero chance of a rate cut on 30 July, despite President Trump pushing the Fed to lower interest rates immediately and two of his appointees to the Federal Reserve, Waller and Bowman, saying they could support such action. However, the rest of the committee feels they have time to wait, especially in light of the recent firmer-than-expected June jobs report and ongoing uncertainty about how inflationary the president’s tariffs will be.

Inflation has been well behaved recently, posting 0.1% and 0.2% month-on-month readings between February and May, but we always suspected it would be three months from April/May before the tariffs showed in the data. That means the July, August and September CPI reports are where we see the potential for 0.4% MoM or even 0.5% prints. The Fed was stung by criticism after suggesting the post-pandemic supply shock price hikes would be “transitory”, only for inflation to hit 9% in 2022. It will not want to cut rates on a hunch and only have to backtrack again if inflation becomes more persistent.

As such, we believe this meeting will be a non-event with rates left on hold and quantitative tightening likely left unchanged.

Goldman Sachs
The FOMC is set to leave the funds rate unchanged at its July meeting this week. The statement is likely to acknowledge the softer growth pace in the first half of the year but is unlikely to offer a strong hint about September. Governors Bowman and Waller have indicated that they would like to cut next week and are likely to dissent. In the press conference, Chair Powell will probably be asked about the two-cut baseline implied by the median June dot. He will likely acknowledge it but note that there are still two rounds of inflation and employment data ahead of the September meeting and reiterate that decisions will be made on a meeting-by-meeting basis.
We continue to expect three 25 BPS rate cuts this year in September, October, and December, followed by two more in 2026 to a terminal rate of 3-3.25%. Our funds rate scenario analysis implies that our probability-weighted Fed forecast remains dovish relative to market pricing.

Market Rate Expectations
Post June Rate Decision
US interest rate futures price in 71% chance of Fed cut in September, was 60% just before.