For the fifth meeting in a row, the Federal Open Market Committee (FOMC) decided to keep rates unchanged, leaving the Fed Funds trading range at 4.25%–4.50%. While it may seem like the policy makers have not done any easing in this cycle, remember, the level for overnight money is 100 basis points below last year’s peak reading. Once again, the decision to keep the Fed Funds Rate at its current level comes as little surprise, as attention now turns to the next official FOMC gathering in September.

Obviously, the political pressure on Chair Powell to cut rates has been ratcheted up of late, but it appears that a majority of the voting members continue to feel the best monetary policy path going forward is to sit back and wait. They want to see how the economic and inflation landscape unfolds given the uncertainties that have arisen from tariff-related developments (more on that later).

Powell has consistently expressed his opinion that the uncertainties surrounding tariffs have placed a cloud of sorts over the macro outlook. In other words, the policy makers see risks ahead to both aspects of their dual mandate: employment and inflation. The increased risks of both higher unemployment and higher inflation place the Fed in a challenging environment. As we sit here in the present, a highly data-dependent Fed remains in place.

So, how are the underlying economic and inflation backdrops looking now, in the second half of the year? After posting a negative reading in Q1 due to a surge in imports, growth for the April–June period rebounded into the plus column. Labor market data has continued to show resilience. The July jobs report, due out Friday, is expected to reveal some modest slowing in new hiring, but with total nonfarm payrolls still increasing by over 100,000 and the unemployment rate remaining at a low 4.2%. And don’t forget, weekly jobless claims (one of the leading economic indicators) also remain low.

What about inflation? With respect to the Consumer Price Index (CPI), investors recently witnessed the possible end to the disinflationary trend that was prevalent from February through May of this year. Both the headline and core monthly CPI readings showed some uptick in June, the first potential signs of tariff-related effects. However, the increases were marginal, and overall inflation has remained well behaved thus far. If there is going to be any evidence of tariffs impacting price pressures, it is expected to start showing up in upcoming inflation data.

Not too surprisingly, the July FOMC meeting did see two dissenters, Fed Governors Waller and Bowman. Both these voting members had recently stated in public that they could support a rate cut at this just-concluded policy meeting, so their vote against the majority was kind of expected. However, it does underscore shifting opinions within the broader FOMC.

The Bottom Line

While September is the next scheduled month for an FOMC meeting, the Kansas City Fed’s annual Jackson Hole conference is slated for August 21–23. Powell has used this venue in the past to communicate potential shifts in policy thinking. In other words, if the FOMC could be getting closer to a rate cut (or not), investors may not have to wait another seven weeks for future guidance. For the record, Powell & Co. are still skewed toward rate cuts overall.