Will the Fed Cut Interest Rates by 25 Basis Points This Week?

The big question on everyone's mind: Will the Fed cut interest rates this week at least by 25 basis points? With the Federal Open Market Committee (FOMC) clocking in for their meeting July 29-30, 2025, anticipation is high. The most probable outcome, in my view, is no rate cut. Everything points toward the Federal Reserve holding firm and maintaining the existing federal funds rate within the 4.25% to 4.5% range. However, monetary policy is never as cut and dry as headlines make it out to be, so let’s break down the forces at play, what signals to expect, and how this decision might affect your wallet and more.

Will the Fed Cut Interest Rates by 25 Basis Points This Week?

Getting into the nitty-gritty requires first understanding the current economic picture. The U.S. economy as of mid-2025 presents a set of challenges, with both high points and lingering issues.

Here's the general picture from the Fed:

• Gross Domestic Product: The American economy showcases good growth figures. The Atlanta Fed estimates a Q2 2025 GDP growth of 2.4%.
• Job Market: On the job front, the unemployment rate sits at 4.2%. However, things might be starting to soften slowly. Layoffs appearing around different companies makes things questionable.
• Inflation: Inflation, as measured by the Personal Consumption Expenditures (PCE) price index, is currently at 2.6%. Although above the Fed's ideal 2% figure, this is still notably better than the 2022 peak of 7.2%. Core inflation estimates at 3.1% by the end of 2025, due to trade-related issues.

Regardless of the positive figures, there are several underlying problems that affects the nation's economy. Policy making is hard with several issues such as trade policy uncertainties influencing decision making processes. As these factors add up, consumer spending can weaken easily.

Since December 2024, the Fed took some time off from cutting those rates, which can lead to them avoiding such serious decisions at any time.

Understanding the Interest Rate Landscape

So, the million-dollar question (that can affect your money): Will the Fed cut interest rates or not? Based on information given, I don't think they will.

The major consensus is that the rate stays the same. The Fed has made it possible they will “wait-and-see” before doing anything so they can observe the whole picture, supporting their strategy.

Regardless, there are those who are thinking otherwise. Fed Governor Christopher Waller thinks that the rate cut makes total sense to avoid further decline. He argues that the current tax laws could hurt demand than the price.

What to keep an eye on

1. Interest Rate Stability:
   • No changes at 4.25-4.5% are estimated. *Don't disregard the possible dissenting vote from Fed Governer Christopher Waller.
2. Economic View:
   • Real GDP Rate: Estimates at 1.4% in 2025. (Down from 1.7% since March)
   • Job Stats: At 4.5% (A slight increase of 4.4% since March)
   • Core PCE Inflation: Estimated at 3.1% (An increase of 2.8% in March)
   • Federal funds rate: 3.9% by the end of 2025
3. Policy Observations. Pay Attention to the tone used by the FOMC! Market experts will be paying very close attention whenever market experts drop words regarding economic activity.
4. Quantitative Tightening and Balance Sheet Updates: Be ready for incoming updates regarding focus on interest rate policy.

Dots and Projections: A Close Look

A revised dot plot will not be available yet. The previous version released in June 2025 are good enough, though.

Here are the Projections they made:

GDP Growth: 1.4% for 2025 A slight decrease from 1.7% in March Job Stats: 4.5%, a slight increase of 4.4 from last March Core PCE Inflation: Estimates around 3.1, slightly higher than the 2.8% from March Feds Fund Rate: Estiamtes around 3.9% by the end of the year. (Potentially implies 0.25% decrease in rate)

Remember that all FOMC projections will be followed to the end. Powell also made it clear, so pay attention.

Upcoming financial data and reports everyone should look forward to include:

Main Things to Remember

PCE Inflation – Watch to see how low (or high) the data goes Employment Stats – A slow-down in jobs could lead to a rush to cutback on everything.

• Sentiments to trade in – An uncertain policy can ruin the chances of recovery

What happens at the meeting and what messages are presented can lead to a host of changes.

• Stocks: The market may see a decrease if the Feds go for a hawk-like tone (higher interest, inflation watch).
• Bonds: Rates may rise with a lot of worries with inflation and yields.
• Currencies and Commodities: If the rates go down, look for more expensive commodities.

Final Thoughts: While managing economic growth, the Feds still need to balance external pressures like those from political groups. And, in my view, the FOMC meeting this week should see stable interest rates with close observation of all economic and monetary signs.