Will the Fed cut rates today? Probably not, but here's when they might

USA Today

2 days ago

The Federal Reserve is expected to hold interest rates steady Wednesday between 4.25% and 4.5% – exactly as interest-rate traders' bets had predicted after the policy-making body's meeting in June.
The traders' bets now predict there's good chance the Fed will lower interest rates at its meeting on Sept. 17. That means Americans won't see short-term interest rates – which are heavily influenced by the Fed's decisions – decline for several weeks.
Ahead the Fed's announcement, two-thirds of interest-rate traders are betting the Fed will cut its interest rate in September, according to the CME FedWatch tool. The FedWatch tool tracks the likelihood that the Fed will change the federal funds rate based on futures prices.
U.S. economy: Here's where the economy stands as the Fed makes its interest rate decision
Will the Fed lower interest rates? Not likely
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Will interest rates drop in 2025?
President Donald Trump's tariff proposals have put the Fed in a difficult position: Inflation stemming from the COVID-19 pandemic has moderated, but consumer prices may be on the rise. Inflation ticked up slightly in May and June – when it rose to a 2.7% annual rate. Analysts suggest lower energy prices are helping to minimize the impact of tariffs.
How much tariffs will raise prices in the coming months remains uncertain, as many details remain unresolved. If the Federal Reserve lowers interest rates before it's clear how tariffs are affecting the prices we pay, it could unintentionally trigger inflation − by encouraging more borrowing to pay for goods made more expensive by those tariffs.
The Fed tries to hold inflation steady at about 2% each year while keeping as many Americans employed as possible. The June jobs report showed unemployment ticked down slightly to 4.1% and the economy added 147,000 jobs. The Bureau of Labor Statistic will give us the next look at U.S. employment on Friday morning.
Current unemployment rate
Though other indicators also suggest the economy remains relatively strong, Powell cautioned after the May meeting that recent inflation and employment data could be indicators of early signs of concern. But he said the uncertainty surrounding tariffs and their impact on the economy has led them to keep interest rates unchanged.
"I think there's a great deal of uncertainty about, for example, where tariff policies are going to settle out," Powell said. "When they do settle out, what will be the implications for the economy for growth and for employment? I think it's too early to know that."