Federal Reserve Chair Jerome Powell, speaking at the ECB forum in Sintra on July 1, emphasized the Fed’s wait-and-see stance. He noted that recent tariff hikes—particularly Trump-era tariffs—have pushed up inflation forecasts, prompting the Fed to delay rate cuts despite strong economic data .

Key points:

Fed funds rate remains at 4.25–4.5%, held steady for the fourth straight meeting .

Powell confirmed that had it not been for tariffs, the Fed likely would have initiated rate cuts already .

The Fed’s dot plot still envisions two quarter-point cuts by year‑end, though officials remain divided—seven expect no cuts, two foresee just one, and ten remain hopeful for 50 bps total .

Market odds for a July cut are slim (~11%), rising to ~63% by September. Many analysts now expect the first cut in September, with possibly two cuts during 2025 .

Some governors favor a July cut, but inflation data—including May PCE readings above target (core PCE at 2.7%)—suggest caution .

🗓️ What’s likely next?

Powell made it clear: tariff-driven inflation uncertainty takes precedence, and the Fed will base any decision on data—especially on inflation and labor market signals .

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