A quirk in the Fed's calendar puts extra pressure on the September meeting

Yahoo

31-07-2025

Nobody really knows what the future will bring, but Wall Street likes to have a good idea, especially when it comes to the Federal Reserve's next move.
What might have been a likely outcome for the central bank to cut rates in September now seems closer to a toss-up, based on the way the market is reacting to Fed Chair Jerome Powell's latest remarks.
At the end of the Fed's policy meeting on Wednesday, Powell didn't explicitly say the next move would be a cut, and reiterated that it's still early days in understanding how tariffs will impact inflation.
(Markets flashed red following Powell's commentary, and the CME FedWatch tool showed the likelihood of a cut in September dropped from 65% on Tuesday to 45% at the end of the meeting.)
Read more: How the Fed rate decision affects your bank accounts, loans, credit cards, and investments
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Fed policymakers don't make rate decisions ahead of time, so Powell's response is typical. But a quirk in the Fed's calendar raises the stakes for the September meeting. As Morgan Stanley's chief US economist Michael Gapen has observed, the gap between the Fed's July and September huddles is the longest in the Fed's annual schedule.
A lot can happen between now and then.
"A reasonable base case is that the effects on inflation could be short-lived, reflecting a one-time shift in the price level, but it is also possible that the inflationary effects could instead be more persistent, and that is a risk to be assessed and managed," Powell said during the press conference Wednesday.
We do have some level of certainty, however. Powell indicated that, to some extent, the Fed has already chosen to look through the inflationary effect of tariffs as a one-time event. The Fed, he reminded everyone in a not-so-comforting way, could have raised rates to counteract the pricing pressures of the new levies. But he and most of his colleagues think it best to wait for now.
However, a long enough wait can result in a different outlook. As Powell himself acknowledged, 'We're going to be looking at a lot of data in the next cycle. It is one of the cycles where we have two employment and two inflation reports, and we'll see where that takes us.' As the timeline stretches out, uncertainty can expand.
Of the data ahead, Powell noted that he's especially keeping his eye on the unemployment rate, as both supply and demand for jobs has declined — deprioritizing the headline monthly job gains. But if the unemployment rate starts to rise, that's a good indicator the central bank has kept up its slightly restrictive posture for too long. But he also suggested the fight to curb inflation "is most of the way back." We already have two dissenters on the rate-setting committee who believe the Fed should already be cutting.
So maybe September will be a no-brainer, and looking back to the July meeting will seem like an overreaction to Powell keeping his options open. The Fed is going to get more data than normal before its next move. Those figures could, however, be in conflict with each other, or suggest keeping a restrictive policy, extending the painful decision making until later in the year. More data will bring more insight.
But that can also mean more waiting.
Hamza Shaban is a reporter for Yahoo Finance covering markets and the economy. Follow Hamza on X @hshaban.