The Federal Reserve's next interest rate decision is expected to keep interest rates steady at around 4.25%-4.50% tomorrow, despite President Trump's urging to cut rates. Here's what's happening ¹ ²:
- *Interest Rate Decision:* The Fed is likely to maintain its current interest rate target, citing persistent concerns about inflation and economic uncertainties.
- *Inflation Concerns:* Inflation is currently above the Fed's goal, with energy prices increasing by 6.1% and core CPI at 4.0%. This suggests that a rate cut is unlikely in the near future.
- *Market Expectations:* According to Polymarket, there's only a 1% chance of a rate cut tomorrow, but traders expect a 19% chance of a 25bps decrease in July and a 41% chance in September.
- *Economic Projections:* The Fed's quarterly economic projections are expected to show inflation accelerating later this year, while unemployment may tick up slightly.
- *Potential Rate Cuts:* Economists forecast one or two rate cuts later in 2025, with some analysts suggesting the neutral rate might be around 3% .
*Key Factors Influencing the Decision:*
- *Tariff Uncertainty:* The impact of tariffs on inflation and economic growth may lead the Fed to wait for clearer signals before cutting rates.
- *Economic Data:* Solid economic data, including low unemployment and steady inflation, may lead the Fed to maintain its current stance.