Powell Signals Patience: September Cut Odds Rise on Data-Dependence

The Federal Reserve is poised to leave its benchmark rate unchanged at 4.25%–4.50% on Wednesday, brushing aside President Trump’s intensified campaign for steep cuts. The policy statement is due at 2 p.m. EDT, with Chair Jerome Powell holding a press conference 30 minutes later. Despite Trump’s rare White House visit to the Fed and his public barbs, the FOMC appears intent on maintaining a cautious, data-driven stance rather than capitulating to political pressure.

Trump has argued that the economy’s 3.0% annualized Q2 growth should justify rate reductions to “let people buy, and refinance, their homes,” even suggesting cuts as deep as to 1%. Yet that headline growth was largely driven by volatile import swings from his own tariff policies, masking a paltry 1.2% gain in private domestic demand and signaling underlying weakness in housing and business investment.

• Fed set to hold steady amid mixed signals on growth and inflation
• Headline GDP skewed by tariff‑driven trade swings, core demand remains soft
• Trump’s push for deep cuts contrasts with Fed’s data‑dependent philosophy

• Statement at 2 p.m. EDT, Powell press conference at 2:30 p.m.
• Two Fed officials, Waller and Bowman, may dissent if no rate cut
• Inflation above 2% target and low unemployment argue for patience

• Attention on policy language for clues on a September rate cut
• Future Fed decisions to hinge on upcoming inflation and jobs data
• Markets are pricing a high probability of easing by year‑end

• The Fed's refusal to cut rates despite political pressure reinforces its credibility and independence, which helps anchor inflation expectations and maintain investor trust in a data-centric approach.
• Keeping the benchmark rate steady at 4.25%–4.50% signals confidence that underlying economic conditions—particularly low unemployment and sticky inflation—remain strong enough to avoid premature stimulus, supporting a controlled landing for the economy.
• By maintaining optionality, the Fed preserves flexibility to cut rates later in the year if inflation cools further or growth slows meaningfully, which could deliver a well-timed boost to risk assets and refinancing activity.
• Market participants gain clarity and predictability from the Fed’s patient stance, allowing for well-calibrated risk management and avoiding the whiplash of reactive policy shifts driven by political cycles.
• The careful, meeting-by-meeting guidance keeps the Fed’s options open for September or year-end action, which can provide tailwinds if incoming inflation and jobs data pressure for an eventual easing pivot.
• Clinging to a disciplined, transparent process can differentiate the U.S. central bank internationally, reinforcing the dollar’s safe-haven appeal and supporting longer-term economic stability.

• Staying on hold despite slowing private domestic demand (just 1.2% growth in Q2) and flagging housing/business investment risks letting underlying weakness fester—potentially leading to a harder landing if consumer or labor-market cracks spread.
• Headline GDP growth overstates real momentum, as it was inflated by tariff-driven trade swings. By not acting, the Fed could be criticized for missing an opportunity to cushion sectors most vulnerable to higher rates, such as housing and manufacturing.
• Political pressure from President Trump may only intensify, injecting more uncertainty and potentially unsettling markets if the White House amps up rhetoric or triggers fresh Fed critique in the public arena.
• Though the Fed is leaning on “patience,” a prolonged period of above-target inflation and slow core demand could force a more aggressive and abrupt rate-cut cycle later, which increases risk of policy missteps and late-stage market volatility.
• Dissenting voices within the FOMC (e.g., Waller and Bowman) suggest that the policy path is far from unanimous, which may embolden further market speculation and messaging noise as September approaches.
• If the Fed’s steady hand is perceived as out of touch with Main Street economic realities, public and business confidence could erode—potentially slowing lending, investment, and hiring as policy lags behind shifting ground conditions.

With inflation still above target and the labor market tight, Powell is unlikely to signal immediate easing, instead preserving optionality for September. The Fed’s “dot plot” and post‑meeting remarks will be scrutinized for hints of when the first cut might come.

Investors will weigh Trump’s rate‑cut campaign against the Fed’s institutional resolve, watching for any shift in rhetoric that could influence market expectations. For now, the central bank’s commitment to a meeting‑by‑meeting approach underscores its resolve to uphold monetary independence.