**”Current Monetary Policy Doesn’t Hinder U.S. Economy”**
**Probability of September Rate Hold Increases from 35% to 54%**
**Aimed at Trump: “Don’t Use Rates for Election Purposes”**
**July Rates Unchanged…The Fifth Consecutive Hold Post-Trump**
Jerome Powell, Chair of the U.S. Federal Reserve (Fed), defended the current monetary policy stance as not being a hindrance to the U.S. economy, even as discussions about a possible rate cut in September ensue. Amid persistent pressure from President Donald Trump, who criticizes current rates to maximize tariff policy effects, the Fed and the administration remain at loggerheads.
During a press conference on the 30th (local time), Powell labeled the current Fed monetary policy as “modestly restrictive” in response to whether a September rate cut expectation was unrealistic. He stated, “I don’t see our current policy stance as inappropriately holding back the U.S. economy.” However, he acknowledged potential downside risks, noting the labor market’s current balance and stable unemployment rate, without committing to any future decisions on rate changes.
Powell maintained that despite some advancement in trade talks by the Trump administration, significant uncertainties around tariff impacts remain. “We’re gaining more information but still face many uncertainties and don’t feel the resolution is near,” he remarked.
Addressing questions about Trump’s rate cut pressures, Powell emphasized central bank independence, warning against using interest rates for electoral gain. He insisted, “An independent central bank effectively serves the public and avoids the temptation to manipulate rates for electoral influence.”
Regarding the rising U.S. national debt interest cost, Powell clarified it was not the Fed’s role to consider government fiscal expenses in monetary policy decisions, a stance upheld by all developed country central banks to preserve the credibility of both the Fed and U.S. fiscal policy.
According to CME’s FedWatch, the probability of the Fed holding rates in September increased to 54% following Powell’s remarks, up from 35% the previous day. Despite expectations of two rate cuts this year based on the Fed’s June dot plot, the market now sees a higher likelihood of rate maintenance in the coming meeting.
Meanwhile, the Fed kept the benchmark interest rate steady at 4.25-4.50%, marking its fifth consecutive hold since President Trump took office. However, recent dissent from committee members such as Michelle Bowman and Christopher Waller, who advocated for a 0.25% cut, indicates a shift from last month’s unanimous decision to maintain rates.