- Fed expected to keep rates low despite Trump’s pressure and economic uncertainties.
- Q2 GDP forecast shows a 2.4% rebound, but consumer spending remains historically weak.
- July jobs report may display slower hiring with unemployment possibly rising to 4.2%.
The U.S. financial markets are waiting for a series of events as the Federal Reserve prepares to announce its latest interest rate decision while major economic data, including GDP and employment reports, are scheduled for release. Federal Reserve Chair Jerome Powell will be closely watched as he addresses the financial outlook and growing political pressure from the White House.
The Federal Open Market Committee (FOMC) will take place on July 29 and 30, with policymakers expected to maintain the federal funds rate in the 4.25% to 4.5% range. Despite President Donald Trump’s calls for immediate rate reductions, analysts anticipate no changes this week. Trump has also accused Powell over the $2.5 billion renovation of the Fed’s headquarters, adding political tension to the meeting.
Morgan Stanley’s Chief U.S. Economist Michael Gapen stated that Powell is likely to show “patience” due to uncertainty surrounding tariffs and trade policy. The Fed’s current stance shows that while rate cuts remain possible before the year ends, the central bank is waiting for clearer signs of economic direction. However, inflation remains above the 2% target, and the labor market, though resilient, has shown signs of slowing.
Economic Data in Focus
Alongside the Fed meeting, key economic indicators are due. The advance estimate of U.S. second-quarter GDP, expected on July 31, is projected to show a 2.4% annualized growth rate, rebounding from the 0.5% contraction in the first quarter. However, consumer spending is predicted to grow just 1.5%, the weakest back-to-back quarterly performance since the early stages of the COVID-19 pandemic. A subdued housing market and cautious business investment are expected to weigh on overall growth.
The July jobs report, set for release on August 1, is expected to show a decline in hiring activity. June saw nonfarm payrolls rise by 147,000, exceeding expectations, while the unemployment rate dropped to 4.1%. Wage growth slowed to 3.7% year-over-year, below analyst estimates. However, according to rumors, the unemployment rate may edge higher to 4.2% in July as companies adopt a more targeted hiring approach.
