Unpredictable US stock market performance prolonged, Federal Reserve resumes interest rate pause
Federal Reserve Maintains Interest Rates in July 2025 Amid Market Expectations for Cuts
In a notable decision, the Federal Reserve chose not to lower interest rates during its meeting on July 30, 2025. This decision came despite calls from President Trump for easing monetary policy.
The federal funds target range remained at 4.25% to 4.5%, reflecting the Fed's cautious stance. The central bank prioritized data on inflation and employment, signaling a "proactive approach" to move policy closer to neutral without weakening labor market conditions or risking a bigger policy correction later.
Market expectations were high for a rate cut later in the year, with experts and investors pricing in roughly a 96% chance of at least a quarter-point cut in the near future. However, the Fed held steady in July to assess more economic data.
Fed Governor Michelle Bowman indicated there could be up to three rate cuts in 2025, but emphasized decisions are data-dependent and not on a predetermined path.
The decision to maintain rates had immediate effects on various markets. The gold price dropped significantly, with an ounce of gold trading at $3,270, down 1.6%. For the first time in over three decades, two members of the Federal Open Market Committee, Christopher Waller and Michelle Bowman, voted for a 25 basis point cut in the federal funds rate.
The oil price, however, rose significantly, with a barrel of Brent crude oil trading at $73.63, up 1.5% from the close of the previous trading day.
The decision also had an impact on the US stock market. While the rejection of a rate cut amid high expectations can cause short-term volatility or declines in stock markets, the anticipation of cuts later in the year suggests markets remained somewhat hopeful for easing, which can support stock prices and reduce bond yields over time. The Nasdaq 100 was calculated at around 23,345 points, down 0.2%.
The European common currency weakened significantly, with one euro being worth 1.1424 USD, a decrease of 1.07%. This vote may have endeared Waller and Bowman to US President Trump, who will be responsible for appointing Powell's successor when his term ends in May 2026.
The S&P 500 was down 0.1% at around 6,363 points at the close of trading, and the Dow Jones closed at 44,461 points, down 0.4% from the previous trading day.
The Federal Reserve continued its pause on interest rates, despite pressure from US President Donald Trump to lower them. One dollar was worth 0.8754 euros at the same time.
In summary, the Federal Reserve maintained rates at 4.25%-4.5% on July 30, 2025, despite Trump's calls for cuts. The decision was grounded in data monitoring, balancing inflation concerns and labor market health. The market expected cuts, with a strong sentiment for rate reductions by year-end. Immediate market effects likely included cautious investor reactions, but sustained anticipation of future cuts helped stabilize markets.
Business leaders who were anticipating a decrease in interest rates due to President Trump's calls may have to reconsider their investing strategies in light of the Federal Reserve's decision to maintain rates. Meanwhile, the decision could present an opportunity for those in the finance sector who might capitalize on the continued uncertainty by adopting proactive and cautious approaches to their business ventures.
