The Fed held its policy rate steady at 4.50% at its July meeting, in line with expectations. This marked the fifth consecutive meeting where the Fed kept interest rates unchanged.
Following the interest rate decision, short-term fluctuations in spot gold, silver, and the US dollar index (DXY) were limited. Markets interpreted the Fed’s statements as cautious but without surprises.
The Fed’s Open Market Committee (FOMC) statement stated, “Inflation remains elevated.” Furthermore, the phrase “decreasing uncertainty” from the previous meeting’s statement was removed. This change was interpreted as a message that uncertainty in the economic outlook persists.
Other important highlights are as follows:
- Economic growth slowed in the first half of 2025.
- Labor market conditions remain strong.
- The overnight reverse repo rate was kept constant at 4.25%, the interest rate applied to reserve balances at 4.40%, and the discount rate at 4.50%.
- Fed members Christopher Waller and Michelle Bowman voted against keeping interest rates steady.
Markets are still strongly pricing in at least one Fed rate cut in 2025.
Nick Timiraos, a Wall Street Journal columnist known for his close ties to the Fed, also stated that the first two paragraphs of the decision were in line with market expectations. However, the lack of a clear change in direction suggests the Fed remains cautious. Timiraos also noted that Bowman and Waller voted to cut interest rates.
*This is not investment advice.