The Federal Open Market Committee (FOMC) of the US Federal Reserve is meeting over two days – July 29 and July 30. Markets expect the US Fed to keep rates unchanged but the focus will be on Fed chair Powell’s press conference.
Whether Fed Chair Powell will continue to be hawkish or shift to a more dovish tone remains to be seen after the US CPI and PCE data for June.
The rationale for a September rate cut may weaken. In the second quarter, US GDP expanded by a stronger-than-expected 3%, demonstrating that the economy is resilient. In addition, ADP data showed that the US private sector added 104K jobs in July, much above estimates of 75K. On the trade front, President Trump imposed a 25% tariff on India beginning August 1st, with possible additional sanctions for Russian energy imports.
US Fed Decesions
The Fed is delaying monetary policy measures until it assesses the impact of Trump’s tariffs on the economy, despite official data suggesting inflation was dropping as recently as May, when the 10% tariff rate was fully implemented.
“The Federal Reserve is expected to leave interest rates on hold Wednesday, despite mounting pressure from President Donald Trump—setting up a direct standoff between the world’s most influential central bank and a White House demanding immediate stimulus,” says Nigel Green, CEO, deVere Group.
US CPI data for June had thrown a surprise for the markets. The all-items index rose 2.7 percent for the 12 months ending June, after rising 2.4 percent over the 12 months ending May. The all items less food and energy index rose 2.9 percent over the last 12 months and on a monthly basis, rose 0.2 percent in June, following a 0.1-percent increase in May.
Pressure on Powell
Meanwhile, the pressure on Powell keeps on mounting. From Trump administration officials to the President himself, the White House wants Powell to drop rates by as much as 300 basis points. Interest rates have remained between 4.25% and 4.5% since December.
“Trump has made no secret of his frustration. Senior administration figures have been pressing the Fed behind the scenes, while the President has repeatedly gone public with calls for lower borrowing costs.
But the central bank appears likely to resist, at least for now, holding firm in the face of aggressive political intervention. In doing so, it could trigger another direct standoff with Trump,” adds Green.
Powell’s term ends next year in May. Trump, who had initially been vocal about the firing of Powell, has toned down his removal.
Some market experts believe the US Fed is fighting for its independence. Amidst this, the idea of opening up the FOMC meeting to the public is doing the rounds. Currently, FOMC meetings are held behind closed doors, preceded by a blackout period.
Azoria, an American investment firm, participated in an emergency federal court hearing in Washington D.C., in an attempt to force Federal Reserve Chairman Jerome Powell to comply with a federal law (Government in the Sunshine Act of 1976) that requires federal agencies to hold their meetings open to public observation.
However, the emergency temporary restraining order (TRO) was not granted by U.S. District Judge Beryl A. Howell.
Azoria Capital’s James Fishback shared his view on X, “First, the Federal Reserve’s lawyers asked the court to dismiss Azoria’s case, a motion that was swiftly denied by Judge Howell, meaning Azoria’s case for transparency and accountability from the Federal Reserve will proceed.
Second, the Federal Reserve’s lawyers conceded that tomorrow’s Federal Open Market Committee (FOMC) meeting is being jointly held with the Federal Reserve Board of Governors, which the Federal Reserve’s attorneys conceded is, in fact, subject to the Sunshine Act.
Azoria believes these joint meetings between the FOMC and Board of Governors may be an attempt to dodge the Sunshine Act and deny Americans their legal right to know what the Federal Reserve is doing.”
US Fed is not only fighting a battle against inflation but also in retaining its independence. How things unfold from here on remains to be seen.
Markets will be glued to the July FOMC meeting that can be watched live on the official YouTube channel of the Federal Reserve Board of Governors on July 30 at 2pm ET, followed by a press conference with Powell.
