Following a two-day scheduled meeting, the Federal Reserve kept its benchmark fed funds interest rate unchanged at 4.25% to 4.5%.
It maintained a cautious stance as it continues to assess the effects of tariffs and ongoing economic uncertainty.
Economic growth is uneven, with stronger business investment offset by weak consumer spending and housing. The Federal Reserve said inflation signals remained mixed, though mostly steady, since early 2025.
The Federal Reserve kept its benchmark interest rate unchanged on Wednesday, July 30, 2025, after its scheduled Federal Open Market Committee (FOMC) meeting, the US central bank announced in a statement.
Maintaining the target federal funds rate in a range of 4.25% to 4.5% reflects the Fed’s ongoing wait-and-see approach as policymakers assess the impact of tariffs and broader economic uncertainty.
In a press conference following the meeting, Fed Chair Jerome Powell noted that higher tariffs are beginning to show more clearly in the prices of some goods. However, their wider effects on economic growth and inflation remain unclear.
Two members of the FOMC, Michelle Bowman and Christopher Waller, dissented by voting in favor of a rate cut. This marked the first time since 1993 that two Fed governors opposed the Chair in the same meeting, according to The Hill. The Fed statement said, they “preferred to lower the target range for the federal funds rate by 1/4 percentage point at this meeting.”
The Fed emphasized continued strength in the labor market: “The unemployment rate remains low, and labor market conditions remain solid. Inflation remains somewhat elevated.”
The central bank’s dual mandate is to achieve maximum employment and maintain 2 percent inflation over the long term. According to the US Bureau of Labor Statistics, the unemployment rate has remained around 4.1% for the past year.
Estimates based on the Consumer Price Index and related data show that Personal Consumption Expenditures (PCE) prices rose 2.5 percent over the 12 months ending in June. According to the Fed Chair, Core PCE prices, excluding food and energy, increased 2.7 percent.
While inflation overall has changed little since early 2025, Powell pointed out a shift in its composition, stating that prices for services have continued to ease, while rising tariffs are pushing up prices in some goods categories.
In the second quarter of 2025, real GDP saw a 3.0 percent increase, bouncing back from a 0.5 percent decline in the first quarter, according to the advance estimate. Chart of real GDP percentage change from the preceding quarter in 2024 through the second quarter of 2025 (advance estimate). Image: US Bureau of Economic Analysis
Powell acknowledged signs of slowing economic activity, stating: “Recent indicators suggest that growth of economic activity has moderated. GDP rose at a 1.2 percent pace in the first half of the year, down from 2.5 percent last year.”
Despite that slowdown, the second quarter saw a stronger 3.0 percent increase in real GDP, bouncing back from a 0.5 percent decline in the first quarter, according to the advance estimate from the US Bureau of Economic Analysis (BEA). Second quarter 2025 growth was driven mainly by fewer imports and stronger consumer spending, partially offset by declines in investment and exports, according to the BEA.
Powell stressed that averaging the first and second quarters offers a clearer GDP view by smoothing out trade-related volatility. He attributed the slower pace of growth largely to weaker consumer spending, while noting that business investment in equipment and intangibles has picked up. However, he described the residential market as continuing to “remain weak.”
The next scheduled Federal Open Market Committee meeting will occur on September 16 and 17, 2025.
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