On 30 July 2025 the U.S. Federal Open Market Committee (FOMC) held its July meeting. Despite intense lobbying from President Donald Trump to slash borrowing costs, the committee voted 9‑2 to keep its policy rate unchanged at 4.25 % – 4.50 %. The two dissenters wanted a quarter‑point cut, but Fed Chair Jerome Powell emphasised that the central bank’s decisions will be data‑driven and guided by its dual mandate of maximum employment and price stability. He noted that the Fed remains committed to supporting maximum employment and returning inflation to its 2 % objective.
Powell’s message: inflation first, jobs are strong
During his press conference, Powell explained that the Fed is focusing on controlling inflation, not on lowering mortgage costs or government borrowing, issues Trump has publicly complained about. He warned that the administration’s new import taxes could lift prices and said policymakers need more time to see how those tariffs affect inflation, jobs and economic growth. Powell reminded reporters that moving too soon risks failing to tame inflation, while waiting too long could damage the labour market. The goal is to “do what we need to do to keep inflation controlled”.
The FOMC statement echoed that caution. It noted that economic growth has moderated, unemployment remains low, and inflation is still somewhat elevated. To achieve its objectives, the committee kept its policy rate unchanged and said it will carefully assess incoming data before making any further adjustments. Markets responded by reducing the implied probability of a September rate cut from nearly 70% to less than 50%, with many traders now expecting the first cut no earlier than October.
Tariff blitz: Trump’s busy day on trade
While the Fed held firm on rates, President Trump grabbed headlines with a blitz of new tariffs. In one day he announced that:
| Tariff action | Details and timing |
| 25 % tariff on Indian goods | After negotiations with New Delhi collapsed, Trump said a 25 % levy would apply to a wide range of imports from India. |
| 50 % tariff on copper pipes and wiring | A surprise tariff on semi‑finished copper products is due to take effect on Friday, causing U.S. copper prices to drop more than 17 %. |
| 50 % tariff on most goods from Brazil | Tariffs on Brazilian products, including some metals and consumer goods, will start on 6 August, though aircraft, energy products and orange juice are exempt. |
| 15 % tariff on South Korean imports | As part of a new trade deal, the U.S. lowered its previously threatened 25 % tariff to 15 % on South Korean goods. In return, South Korea agreed to invest US$350 billion in U.S. projects, about US$150 billion of which will fund a shipbuilding partnership to “Make America Shipbuilding Great Again”, and to purchase US$100 billion of U.S. liquefied natural gas. |
| Ending the “de minimis” exemption | The White House plans to suspend the duty‑free allowance for small packages under US$800 starting 29 August, meaning low‑value shipments will face all applicable duties. |
These measures are part of Trump’s campaign to renegotiate trade relationships. He claims the tariffs will revive American manufacturing, and the South Korea deal specifically earmarks funding to rebuild the U.S. shipbuilding industry. Critics note that tariffs also raise input costs; the copper duty, for example, boosted consumer prices and weighed on materials stocks.
Labour market still solid
Recent data show the U.S. labour market remains stable despite the trade wars. Weekly initial jobless claims fell by 4,000 to 217,000 in mid‑July, a three‑month low. Continuing claims were around 1.955 million. Economists said the low claims give Fed officials no cover to cut rates; strong employment means there is little urgency to stimulate growth. Businesses are reluctant to lay off workers and are instead delaying new hires while they await clarity on tariff policy. Surveys from S&P Global show that firms are passing higher import costs onto customers.
Looking ahead: PCE and jobless claims
Markets are now awaiting two key reports scheduled for 31 July: the Personal Consumption Expenditures (PCE) price index and initial jobless claims for the week ending 26 July. The PCE index, the Fed’s preferred inflation gauge, is expected to show that core inflation grew about 0.3 % month‑on‑month. Initial jobless claims are forecast to rise modestly to around 223,000, up slightly from the latest 217,000 reading. These reports will provide fresh clues about whether inflation is cooling and whether the labour market is softening.
What it means for September and beyond
Retail traders hoping for an interest‑rate cut in September may be disappointed. Powell’s remarks suggest that the Fed will wait for convincing evidence of lower inflation before cutting rates. Tariffs are pushing prices higher and could keep PCE inflation above the 2 % target through the summer. At the same time, the labour market is too strong to justify stimulus; jobless claims are low and business activity continues to expand. Even though traders sometimes joke about wanting higher unemployment to force the Fed’s hand, the reality is that tariffs and related investment deals, such as the $350 billion South Korea investment and the shipbuilding partnership, could create jobs rather than destroy them. Unless inflation falls sharply or the labour market weakens dramatically, the Fed is likely to stand pat in September and reassess policy later in the year.
Key Takeaways
- FOMC decision: Rates held at 4.25 % – 4.50 %; Powell emphasises maximum employment and price stability.
- Powell’s stance: Focus on controlling inflation; not swayed by political pressure for cuts.
- Trump’s tariffs: 25 % levy on Indian goods, 50 % copper tariff, 50 % tariff on most Brazilian imports, and 15 % tariff on South Korean goods with US$350 billion South Korea investment.
- Labour market: Jobless claims at 217,000, a three‑month low; labour market strength limits rate‑cut justification.
- Upcoming data: Markets await PCE price index and initial jobless claims to gauge inflation and employment trends.
- Outlook: Odds of a September rate cut have fallen; the Fed may hold rates until later in the year unless inflation and employment data weaken significantly.
In summary, the Fed’s July meeting underscored its commitment to stable prices and full employment. President Trump’s tariff barrage is adding new uncertainty, potentially lifting prices even as it aims to bring jobs back. Retail traders hoping for quick rate relief may need to be patient: with inflation elevated and the labour market resilient, the Fed is likely to stay the course for now.
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