Fed Holds Steady on Interest Rates as Inflation Stays Elevated

The U.S. Federal Reserve is showing no signs of imminent rate cuts, according to signals from policymakers on July 28, 2025, as inflation remains persistently above target and global trade costs continue to put upward pressure on prices.

At the heart of the Fed’s caution is the core Personal Consumption Expenditures (PCE) index, which is expected to hold at around 2.7%, well above the central bank’s 2% target. While some indicators suggest economic cooling, including slight softening in hiring and slower consumer spending, strong wage growth and solid jobless claims continue to indicate underlying strength in the labor market.

Adding to inflationary concerns are elevated import costs tied to new U.S. tariffs on European and Mexican goods, as well as ongoing global supply chain frictions. These pressures have led Fed officials to adopt a more hawkish tone, with analysts now forecasting no rate cuts for the remainder of 2025.

President Donald Trump has openly criticized the Fed for not acting to lower borrowing costs, suggesting a change in leadership could be considered. Despite political pressure, central bank officials emphasized that their policy decisions will remain data-driven, with inflation control still the top priority.

Markets have responded by adjusting expectations. Bond yields rose modestly as traders scaled back bets on monetary easing, while equity markets remained stable, reflecting investor confidence in the broader economy’s resilience.

With the Fed’s next policy meeting scheduled for late August, attention will now turn to upcoming inflation reports and consumer data. Unless price pressures show clear signs of easing, the Fed appears poised to keep interest rates unchanged through the end of the year.