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Essentials of Monetary Policy

The Fed Holds Rates Steady, But Sees Slowing Growth

July 30, 2025
Marc-Antoine Dumont
Senior Economist

According to the Federal Reserve (Fed)

  • The Fed kept its policy interest rates unchanged. The target range for the federal funds rate remains between 4.25% and 4.50%.
  • While fluctuations in net exports continue to influence the data, recent indicators suggest that economic activity growth has moderated during the first half of the year. The unemployment rate remains low and labour market conditions are still solid. Inflation, however, remains somewhat elevated.
  • Uncertainty surrounding the economic outlook remains high. The Committee continues to monitor risks to both sides of its dual mandate.

Comments

As expected, the Fed held its policy rate steady today, in line with the broad consensus among forecasters. The Federal Reserve has not changed its monetary policy since the December 2024 meeting. It is worth noting, however, that two Fed governors voted in favor of a rate cut, marking the strongest dissent among Fed policymakers in 33 years.

The Fed is maintaining its current stance on interest rates, but a shift remains possible before year-end. The tone of the statement shows a slight change from the previous one, explicitly highlighting the slowdown in economic activity and the elevated level of uncertainty. Nonetheless, Jerome Powell reiterated in his press conference that the labour market remains close to full employment, but downside risks persist and the unemployment rate will be a key indicator in the coming months.

On the inflation front, the effects of tariffs are beginning to be felt on the prices of certain goods, although economic growth indicators have yet to show a marked response. Overall, the Fed’s decision to keep its monetary policy unchanged reflects a slight intensification of inflationary pressures and the continued strength of the labour market.

Implications

Although the Fed has observed a slowdown in growth during the first half of the year and persistent uncertainty, it has kept its key interest rates unchanged. From our perspective, we anticipate modest growth in the US economy in the second half of the year. In this context, we expect two 25-basis-point rate cuts in the fall of 2025.

2025 Schedule of Central Bank Meetings

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