Interest Rates Archives

The Record-Long U.S. Government Shutdown Has Come to an End

Written by IntaCapital Swiss on November 19, 2025. Posted in News & Reports, Uncategorized. Leave a Comment

Global shares rose on Monday, 10th November, largely driven by sentiment that the historic U.S. federal government shutdown was finally nearing an end. The day before, on 9th November, the U.S. Senate advanced an agreement that would potentially reopen the federal government and end a shutdown then in its 40th day, which had furloughed federal workers, disrupted air traffic, and delayed food aid programmes.

On Wednesday, 12th November, the Senate voted on a House-passed procedural bill amended to fund the government until 30th January 2026. The Senate passed the measure and sent it back to the House of Representatives, where it was approved the same evening by a vote of 222–209. As in the Senate, Democrats largely opposed the bill because it did not include their key demand: renewal of subsidies for Affordable Care Act insurance policies, which are set to expire on 31st December 2025.

Later that evening, at 10:24 p.m. EST, President Donald Trump signed the legislation into law, officially ending the longest government shutdown in U.S. history (43 days). Experts estimate it may take federal workers until the end of the year to clear the accumulated backlog. Transport Secretary Sean Duffy indicated that current flight restrictions at major U.S. airports could take up to a week to lift. Delta Airlines’ CEO reported that over 2,000 flight cancellations linked to the shutdown will negatively affect the company’s quarterly earnings, with holiday bookings down by approximately 5%–10%.

According to data from the Congressional Budget Office (CBO), the shutdown cost the government USD 3 billion in back pay for furloughed workers and USD 2 billion in lost tax revenue, mainly due to reduced IRS tax-compliance activities. The CBO further estimates that the total impact on the U.S. economy could range between USD 7 billion and USD 14 billion, with Q4 GDP potentially falling by 2% due to reduced government spending. In a letter dated 29th October 2025 to the House Budget Committee, the CBO director noted: “Although most of the decline in GDP will eventually be recovered, the CBO estimates that USD 7–10 billion will not be recovered.”

Federal Reserve officials are now preparing to determine whether to cut interest rates again at their December policy meeting. Unfortunately, limited data availability — due to the shutdown’s impact on the Bureau of Labour Statistics (BLS) and the Bureau of Economic Analysis (BEA) – may hinder their decision-making. However, it is hoped that all necessary data will be available by the meeting on 10th December 2025, unlike the previous meeting on 28th–29th October, when they had only partial data.

The legislation signed by President Trump only funds the federal government until 30th January 2026. This stopgap gives Democrats ample time to renew their demands for the reinstatement of Affordable Care Act insurance subsidies, which will have expired by 31st December 2025. Should lawmakers fail to reach an agreement on this contentious issue, the American public may once again have to brace for another federal government shutdown.

Bank of England Keeps Interest Rates on Hold

Written by IntaCapital Swiss on November 7, 2025. Posted in News & Reports. Leave a Comment

In a knife-edge vote, with Governor Andrew Bailey casting the deciding ballot, the MPC (Monetary Policy Committee) voted 5–4 to keep interest rates on hold at 4.00%. It was a narrower margin than expected, with one poll of economists prior to the announcement predicting a 6–3 vote in favour of keeping borrowing costs unchanged. Indeed, two Deputy Governors of the Bank of England, David Ramsden and Sarah Breeden, along with the rest of the minority, voted for a 25-basis-point rate cut. It was also the first time that Sarah Breeden voted against the majority since joining the MPC in 2023.

Although inflation remains almost double the Bank’s target, officials announced after the vote that they believe inflation has now peaked at 3.8%. The MPC also signalled that rates could fall to 3% by 2028, while some analysts predict that cuts could come sooner. Experts suggest that Governor Bailey’s deciding vote was influenced by several factors, one being his desire not to appear biased towards the government, particularly with the Chancellor’s Budget just around the corner. It is also thought he preferred to wait and see what fiscal measures the Chancellor will announce, especially as she has been signalling a short-term increase in taxes.

Minutes released from the MPC meeting showed that Governor Bailey was the most dovish among the majority. In a written statement, the Governor said: “We still think rates are on a gradual downward path, but we need to be sure that inflation is on track to return to our 2% target before we cut them again”.

A number of market experts have described this as a “dovish hold”. Governor Bailey also remarked that “upside risks to inflation have become less pressing since August”. Analysts suggest that another reason for maintaining rates was the Governor’s preference to wait for further evidence that inflation is continuing to decline.

Interestingly, several financial experts believe that the Bank of England’s latest inflation forecast has paved the way for an interest rate cut (estimated at 25 basis points) when the MPC meets again on 18^th December. Data shows that the Bank of England has cut interest rates five times since Labour won the general election on 4^th July 2024. Following today’s decision, Governor Bailey noted that “the MPC would have an opportunity to consider the Budget before its 18^th December meeting”.

If, as suspected, the Budget includes tax increases, analysts predict that weaker demand could follow, pushing inflation lower in 2026 and thereby creating a plausible case for a rate cut in December.

The Federal Reserve Cuts Key Benchmark Interest Rates

Written by IntaCapital Swiss on November 4, 2025. Posted in News & Reports. Leave a Comment

On Wednesday, 29^th October, the Federal Reserve’s FOMC (Federal Open Market Committee), for the second time in 2025, and in consecutive months, reduced interest rates by 25 basis points to 3.75% – 4.00%, marking the lowest level in three years. The vote to cut rates was 10 – 2 in favour, with two dissenting voices opposing the decision: Stephen Miran and the President of the Federal Reserve Bank of Kansas City, Jeffrey Schmid.

It appears that the Federal Reserve is divided into two camps, with the dissenters concerned about inflation, while the majority are focused on the job market. Two non-voting members of the FOMC, Lorie Logan, President of the Federal Reserve Bank of Dallas, and Beth Hammack, President of the Federal Reserve Bank of Cleveland, who will rotate into voting positions in 2026, both indicated they would have preferred to hold rates steady this time.

Remarks made by the aforementioned Federal Reserve Bank Chairs suggest that, moving forward, there will be a lively debate over the next six weeks ahead of the next FOMC policy meeting on 9th – 10^th December. It is shaping up to be a direct contest between those concerned about persistent inflation and those prioritising support for the labour market. Dallas Fed chair Logan remarked, “I’d find it difficult to cut rates again in December unless there is clear evidence that inflation will fall faster than expected or that the labour market will cool more rapidly.”

At a press conference following the rate cut, Federal Reserve Chairman Jerome Powell advised that another reduction at the next policy meeting in December “is not a foregone conclusion”. The Chairman added, “There were strongly differing views on how to proceed in December during the meeting today and we have not made a decision about December”. Therefore, no decision has yet been made regarding future rate cuts, with Powell emphasising that any such move should not be seen as inevitable.

The Federal Reserve has a so-called dual mandate requiring policymakers to maintain both low unemployment and low inflation. Chairman Powell noted in October that risks to the labour market are increasing, though experts have advised that the ongoing government shutdown has resulted in a lack of economic data, a factor that may be hampering FOMC decision-making. One analyst commented, “A prolonged government shutdown and on-going tariff negotiations continue to introduce significant uncertainty into the immediate monetary policy outlook”.

Experts suggest that the Federal Reserve’s hands are somewhat limited due to the near blackout on economic data. However, the government did unexpectedly release the September 2025 CPI (Consumer Price Index) figures on 24^th October, which showed a 3% annual increase and 0.3% monthly increase, both lower than anticipated. The FOMC remains committed to both sides of its dual mandate, and with economic uncertainty still elevated, has seemingly opted to prioritise employment for now. Inflation, however, remains above target, and if next month’s data (assuming the government shutdown ends) shows an uptick in inflation, it could see renewed tension between the labour market and inflation factions within the FOMC.

Swiss National Bank Keeps Benchmark Interest Rate on Hold

Written by IntaCapital Swiss on September 25, 2025. Posted in News & Reports. Leave a Comment

Today, the SNB (Swiss National Bank) kept its key benchmark interest rate unchanged at 0%, as it continues to assess the impact on the economy of the tariffs imposed by United States President Donald Trump. The zero percent interest rate is the lowest among all major central banks and reflects the monetary policy of the SNB and the unique position of Switzerland’s economy. Money markets were not surprised by the interest rate hold (the first in seven meetings), but experts advise that, apart from tariffs dimming the outlook for the economy in 2026, there has been a small uptick in inflation in recent months.

Following the first monetary policy decision since Switzerland was hit with 39% tariffs in August this year, officials from the SNB noted that they expect growth in 2026 to be just under 1%, with unemployment likely to continue rising. Experts also suggest that the interest rate hold was also down to the stability of the Swiss Franc and also reflects the return of inflation that is still within the SNB’s target range of 0% – 2%, but is expected to move closer to the 1% mark in the next few years, having returned from negativity in May of this year.

The Chairman of the SNB, Martin Schlegel said, “Inflationary pressure is virtually unchanged compared to the previous quarter and we will continue to monitor the situation and adjust our monetary policy, if necessary, to ensure price stability”. The Chairman, with regard to interest rates, has said repeatedly that there are problems with reintroducing negative interest rates, which were in play between December 2014 to September 2022, which initiated concerns from both pension funds and savers.

Officials from the SNB also advised that Swiss companies doing business in the watchmaking and machinery sectors have been especially affected by tariffs, but the impact elsewhere, particularly in services has been limited. They also went on to say “The economic outlook for Switzerland has deteriorated due to significantly higher U.S. tariffs, which are likely to dampen exports and investment, especially“.

After the announcement, the Swiss Franc was broadly unchanged against the Euro and the US Dollar. Since January of this year, the Swiss Franc has rallied against the US Dollar and the Euro and has approached its highest level in almost a decade as investors have treated the currency as a safe haven in times of uncertainty. Furthermore, analysts advise that data released shows that since the beginning of the year, the Swiss Franc has rallied over 12% against the dollar and circa 1% against the Euro, making it one of the best-performing G-10* currencies of 2025.

*G-10 – A forum of eleven economically advanced nations that consult on economic and financial matters, such as international financial stability.

Purpose

To foster cooperation and address emerging financial risks, especially concerning the International Monetary Fund (IMF).

History

The group formed from an agreement to provide the IMF with additional funds through the General Arrangements to Borrow (GAB).

Membership

Includes Belgium, Canada, France, Germany, Italy, Japan, the Netherlands, Sweden, Switzerland, the United Kingdom, and the United States.

Bank of England Leaves Benchmark Interest Rates on Hold

Written by IntaCapital Swiss on September 22, 2025. Posted in News & Reports. Leave a Comment

Today the BOE’s (Bank of England) nine-member MPC (Monetary Policy Committee) voted 7-2 to keep interest rates on hold at 4.00%, with the two dissenting votes of Swati Dhingra and Alan Taylor both voting for a 25-basis point cut. Experts were not surprised at the MPC holding interest rates as data released shows that prices are increasing at twice the rate predicted by the BOE. However, officials said that they still expected inflation to return to the Central Bank’s target of 2%, but remained somewhat on the fence as regards further cuts this year.

However, the Governor of the Bank of England, Andrew Bailey, was slightly more forthcoming, saying that they are not done with the cycle of cutting interest rates referring to the possibility of upcoming risks with regards to cooling in the jobs market. Whilst highlighting rising inflation and an easing labour market Governor Bailey said, “there are risks on both sides” and added “I continue to think that there will be further reductions, but I think the time and scale of those is more uncertain now than before August”.

Analysts advise that financial markets see less than a 30% chance of another rate cut this year despite any implied optimism by Governor Bailey. The MPC meets two more times this year to discuss interest rates and experts advise that a rate cut at the November meeting of the MPC is all but ruled out as they expect inflation to hit 4%, double the BOE’s target figure which is backed up by Governor Bailey also saying “The pricing at the moment which basically says ‘look, there’s going to be a period where we’re watching very carefully to see how the economy unfolds before whatever we do next in terms of movement’ is, I think is the right thing”.

The BOE has also warned that the economy is being negatively impacted due to further tax raids by the current labour government with analysts saying that the Chancellor of the Exchequer, Rachel Reeves, will probably have to find somewhere between £20 Billion to £50 Billion in either spending cuts or tax increases to maintain her fiscal plans, but according to some financial commentators, either way her credibility is diminishing at a rapid rate.

Indeed, Governor Bailey noted that higher inflation was partly to blame on government policy, and in an open letter confirming that thought, he advised inflation was almost double (3.8%) of the bank’s target and said this was due to “the increase in employer NICS (National Insurance Contributions) and pay growth in sectors with a large share of employees at or close to the NLW (National Living Wage). Officials noted that they had previously warned that the introduction of net zero packaging taxes are also pushing up prices with inflation on supermarket shelves expected to continue up to close of business 31st December 2025. All in all, analysts advise that the general feeling in the financial markets is that the benchmark interest rate will remain the same at 4.00% come the end of the year.

Federal Reserve Cuts Interest Rates

Written by IntaCapital Swiss on September 18, 2025. Posted in News & Reports. Leave a Comment

Today, and for the first time since December 2024, the FOMC (Federal Open Market Committee) cut their benchmark interest rate by 25 basis points to 4.00% – 4.25%. This comes after literally months of sustained abuse from the President of the United States, directed at the chair Jerome Powell to slash interest rates. The FOMC voted by 11 – 1 to cut interest rates, with Governor Stephen Miran voting for a 50-basis point cut with the new benchmark interest rate now at its lowest since November 2022. The two governors, Waller and Bowman, who dissented at the last vote both voted with the majority this time round in what is seen as a victory for Chairman Powell as experts had predicted as many as four dissenters.

Chairman Powell commented “Job gains have slowed and the downside risks to unemployment have risen” and he suggested that it will be reasonable to expect Trump’s tariffs will lead to a one-time shift in prices. He went on to say “But it is also possible that the inflationary effects could instead be more persistent and it is a risk to be assessed and managed. Our obligation is to ensure that a one-time increase in the price level does not become an ongoing inflation problem”. Analysts confirmed the interest rate cut was due to the rise in unemployment and officials from the Federal Reserve hinted that there may be two more cuts before the end of the year.

Experts suggest that the Federal Reserve is facing a dichotomy in that lowering borrowing costs will indeed make money cheaper but there is a risk of potentially causing prices to rise and with prices already on the up and due to tariffs the price rises could be even more severe. Recently released data showed that inflation had risen to 2.9% in August having hit a low of 2.3% in April of this year. The director of the CBO (Congressional Budget Office – known to be non-partisan) announced on Tuesday of this week that tariffs have already negatively impacted prices and they were increasing at a faster rate than anticipated.

Federal Reserve officials have said that the labour market is now their biggest concern, with Chairman Powell having stated at the end of August that the “Labour market is experiencing a curious kind of balance where demand and supply for workers had slowed” whilst warning that downside risks to the job market could see an increase in layoffs and unemployment. Chairman Powell also added, “Labour demand had softened and the recent pace of job creation appears to be running below the break-even rate needed to hold the unemployment rate constant. I can no longer say the labour market is very solid”.

Commentators have already suggested that the ¼ of 1% cut in interest rates will not even begin to appease President Trump who has hurled abuse at the Federal Reserve and very personal abuse at Chairman Powell for not drastically slashing interest rates. President Trump wants to return to the era of very cheap money but has so far lucked-out on his ambition to control the Federal Reserve. Indeed, his efforts to fire Governor Lisa Cook (a Biden appointee) for alleged mortgage fraud will now go to the supreme court. Trump has long coveted controlling the Federal Reserve and he has already got influence in the Supreme Court. If, as one expert commented, Trump did gain control over the Federal Reserve and cut interest rates to 1% there would indeed be an initial big boom but it would be followed by a massive bust.

ECB Holds Interest Rates Steady

Written by IntaCapital Swiss on September 12, 2025. Posted in News & Reports. Leave a Comment

There were no surprises for financial markets as today and for the second meeting in a row the ECB, (European Central Bank) kept their key deposit rate unchanged at 2%. Officials at the ECB advised that inflation was under control and any economic pressures were abating but remained tight-lipped on future policy decisions. Experts suggest that investors have concluded that rate cuts have now come to an end with the President of the ECB Christine Lagarde announcing that “inflation is where we want it to be.”

Between June 2024 and June 2025, the ECB has halved its key deposit rate and has been held at 2% with President Lagarde going on to say, “We continue to be in a good place”. Policymakers advise that the central bank see inflation falling below their benchmark target of 2% in 2026 with President Lagarde saying, “risks were more balanced” and adding “ Two things have clearly moved out of our radar screen when it comes to downside risk, the first one is risk of European retaliation the second thing… is that trade uncertainty has clearly diminished.

Interestingly the ECB also sees headline inflation hitting 1.9% in 2027 which is below their projected figure as advised in June of this year with core inflation hitting the 1.8% mark which is also below the ECB’s predicted target of 2%. When questioned on the discrepancies President Lagarde said, “We have indicated very clearly in our strategy that minimal deviations, if they remain minimal and not long-lasting, will not justify any particular movement”. Experts say that financial markets are pricing in only a 40% chance of a further rate cut by Q2 2026, this despite their predictions that the United States Federal Reserve will cut interest rates six times by the close of business 2026.

With regards to tariffs and after weeks of heated negotiations the EU (European Union) and Washington finally arrived at a trade agreement in late July of this year with an agreement of a blanket tariff on most exports including cars to the USA of 15%, half of the original 30% imposed by President Trump. In return the EU agreed to purchase USD 750 Billion’s worth of U.S. energy and invest an additional USD 600 Billion worth of investment into the USA above current levels. President Lagarde noted that uncertainty about global trade has eased after a number of tariff deals including that of the EU.

One problem that looms large for the ECB is the parlous state of French politics and their economy which has pushed French bond yields increasingly higher. Experts say that whilst the ECB has the financial muscle to intervene it is only when unwarranted and disorderly rise in borrowing costs. When questioned on the point President Lagarde said that the Euro Zone sovereign bond markets were orderly and functioning with smooth liquidity. The word coming out of the ECB as described by some experts is that they feel rates are appropriate to cope with the fallout from President Trump’s tariffs, the current geopolitical tensions and any upcoming political and economic tensions in France.

Borrowing Costs for the United Kingdom Highest Since 1998 As Sterling Falls 1.5%

Written by IntaCapital Swiss on September 3, 2025. Posted in News & Reports, Uncategorized. Leave a Comment

Yesterday, 2nd September, the pound slipped a full 150 basis points against the US Dollar (came back to a 1% drop at $1.34) on the back of increasing borrowing costs on the 30-year gilt (UK Government Bond) which attained its highest level since May 1998. Thirty-year gilts rose to 5.72% and some commentators who are sympathetic towards the Labour government suggested that the coincidental global sell-off in government bonds was the main reason for the increase in yields. Indeed, the Treasury Minister, Spencer Livermore, when questioned on this subject in the House of Lords advised that gilt yields have risen in line with global peers and moves have been orderly.

In reality, experts in this arena suggest that the sell-off in long-dated UK government bonds is due more to global investors in the United Kingdom who are worried that the government is showing a lack of fiscal responsibility. Elsewhere other experts chimed in saying that as inflation has been sticky and remains the highest of the G7 countries is yet another reason for the sell-off in the 30-year issues. Equally damning, a number of economists and analysts suggest that the central issue is welfare expenditure which should it remain on what is generally agreed an unsustainable path, confidence will be further eroded resulting in more long-gilt selloffs. Other concerns for financial markets and investors alike has been the sudden rush in the number of potential new government policies reminding investors how weak the United Kingdom’s fiscal position is, which has, according to a number of financial commentators, also helped facilitate the rush to sell long-dated gilts.

However, there has been one reassuring sign in the UK government bond market, as on the day long-dated gilts borrowing cost hit the highest since 1998, the United Kingdom sold a record GBP 14 Billion of new benchmark 10-year government bonds with orders being oversubscribed to the tune of GBP 141.2 Billion. The notes which are due in October 2035 were priced according to those close to the sale at 8.25. basis points over the equivalent/applicable benchmark* and carry a coupon of 4.75%. Experts noted that the sale was ten times oversubscribed and with rates on the 10-year bond the highest since January would increase the case for buying this bond despite the fiscal uncertainty of the UK’s economy.

*Equivalent/Applicable Benchmark – This benchmark is known as SONIA (Sterling Overnight Index Average) which replaced sterling LIBOR (London Interbank Offer Rate) which uses real overnight transaction data to provide a more robust benchmark and is now the standard for new sterling denominated contracts.

The problem for the Chancellor of the Exchequer and the Labour Party is the cost of borrowing keeps increasing as can be seen by the latest GBP 14 Billion sale of 10-year bonds (the yield being the highest among the Group of 7 nations). Add to that the rise across the board in UK government bond yields, financial experts predict that the government will soon have to raise taxes to keep them within their own set of self-imposed fiscal rules. Borrowing costs are a key pillar that holds up the government’s fiscal arithmetic, and with the autumn budget looming high on the horizon the Prime Minister and the Chancellor could find themselves at the mercy of bond yields.

The Bank of England Cuts Interest Rates

Written by IntaCapital Swiss on August 11, 2025. Posted in News & Reports, Uncategorized. Leave a Comment

On Thursday, 9th August the BOE (Bank of England) cut interest rates by 25 basis points to 4% and in the process, the MPC (Monetary Policy Committee) took borrowing costs to its lowest level since March 2023. However, this was no ordinary MPC meeting as for the first time in its 23-year history the vote was deadlocked and the committee took the unprecedented step of voting twice, with the vote finely split by 5–4 in favour of a rate cut. The decision by the MPC saw two senior voting members (Chief Economist Huw Pill and Deputy Governor Clare Lombardelli) vote against Governor Andrew Bailey, with officials being deeply divided over the direction of interest rates, with the United Kingdom not only experiencing a cooling labour market but a resurgence in inflation.

The last time the MPC cut interest rates was in May of this year and since then the opposition to interest cuts has unexpectedly grown, however as seen above the two dissenting votes for a rate cut helped win the day. The BOE is still sticking with its overall guidance informing the financial markets that rate cutting will be “gradual and careful” whilst warning of a cooling in demand for workers and an emerging slack in the economy. The Governor of the BOE Andrew Bailey reiterated previous comments by saying “it remains important that we do not cut bank rate too quickly, or by too much”. The MPC also pointed out that they expect inflation to hit 4% in September – up from the previously advised figure of 3.7%.

Elsewhere tax data suggests that since the Labour Government announced plans to increase employers’ payroll tax and the minimum wage, 185,000 jobs have been lost. Data from the BOE’s own survey of firms show a growing stagflation risk, and in the upcoming year, they expect businesses to put up their own prices by circa 3.7%. Indeed, the MPC further advised that since May of this year upside risks to the consumer price had moved slightly higher with particular emphasis towards rising food bills, and they went on to say that the outlook for employment growth over the next 12 months has deteriorated and the expectations on wage growth remains at 3.6% which is somewhat sticky and has become a bit of a hot potato.

Governor Bailey at a press conference once again insisted that interest rates are on a downward path and that the current inflation figure will only be temporary, but he was somewhat evasive and wary about when they will announce the next interest rate cut. Money market traders have reduced their bets on a November cut to under 50%, especially as Governor Bailey went on to say, “there is, however, genuine uncertainty now about the course of interest rates”. Experts suggest that the BOE is very worried that inflation may well persist as the current headline figure is way above the benchmark target, and there is the possibility that policymakers are considering ending the easing cycle.

Analysts suggest that there are interesting times ahead at the BOE especially as the world waits and sees the effect of President Trump’s tariffs on world trade and the global economy. Furthermore, Thursday’s interest rate cut was the most divisive under the five-year stewardship of Governor Bailey, plus no Deputy Governor has ever voted against Governor Bailey, that is until Claire Lombardelli’s dissenting vote. Such dissent from the Deputy Governor is highly unusual and highlights the deep fractures within the MPC as to how to tackle the resurgence in the current price pressures. The labour party happily points out that under their government borrowing costs have been coming down, but those rates dictated by the financial markets have been going in the opposite direction with the 30-year gilt yield prior to the BOE’s interest rate cut standing at 5.43%. After the BOE’s announcement last Thursday the 30-year gilt yield stood at 5.32%. Some commentators have made a somewhat damning point in that perhaps within the Bank of England there are those who are perhaps politically motivated and not so independent as we are led to believe.

Some experts suggest that the MPC in lowering the borrowing rate is in direct conflict with their prediction of inflation increasing and this despite the fact the United Kingdom has the highest inflation rate within the G7. Furthermore, analysts point out that since April, the pound has dropped 1.5% and 2.5% against the US Dollar and the Euro respectively leaving the pound open to further falls whilst pushing inflation up through higher import prices.

The current disagreements will also impact policymakers and their decisions as to how to tackle the current uplift in inflation and with the Governor and Deputy Governor seemingly split on monetary policy, Governor Bailey’s vote will become more and more important as the United Kingdom approaches the end of the year.

The Federal Reserve Keeps Interest Rates on Hold

Written by IntaCapital Swiss on July 31, 2025. Posted in News & Reports. Leave a Comment

On Wednesday, 30^th July and for the fifth straight time, the Federal Reserve’s FOMC (Federal Open Market Committee) kept interest rates steady at 4.25% – 4.50%. The committee voted 9 – 2 to keep interest rates on hold with the two dissenting voices belonging to Governor Christopher Waller and Governor Michelle Bowman. Both governors are appointees of President Donald Trump and experts point out that such dissension from political appointees has not occurred for over 30 years which is a sign of both political pressure and economic uncertainty being felt by the Federal Reserve. Chairman Powell indicated he was not concerned with the dissenting voices but he did say “On the dissents, what you want from everybody and also from a dissenter is a clear explanation of what you are thinking and what arguments you are making”.

Officials from the Federal Reserve downgraded their view of the economy saying “recent indicators suggest that growth of economic activity moderated in the first half of the year” as opposed to previous statements where growth was characterised as expanding at a solid pace. Interestingly, analysts have pointed out that today’s interest rate decisions were made without key data, and the Chairman of the Federal Reserve Powell has pointed out that decisions are currently data driven. This key data is the Commerce Department’s Personal Income and Outlays report, (due out 31^st July), which provides essential data on household spending and income, and the Personal Consumption Expenditures price index which is the Federal Reserves favoured inflation gauge.

Following the FOMC meeting, Chairman Powell said the central bank has confidence in the economy of the United States and that it is strong enough to hold interest rates steady as it determines how the tariff policy of President Trump ultimately plays out and their effect on the economy. He went on to say “Higher tariffs have begun to show through more clearly to prices of some goods, but their overall effects on economic activity and inflation remain to be seen. A reasonable base case is that the effects on inflation could be short lived, reflecting a one-time shift in the price level. But it is also possible that the inflationary effects could instead be more persistent and that is a risk to be assessed and managed”.

Despite political pressure and personal insults from President Trump to Chairman Jerome Powell the Federal Reserve held interest rates steady. Despite many experts predicting a rate cut at the next meeting of the FOMC (16^th – 17^th September), the financial markets pared back bets expectations for a rate cut, whilst interest rate futures indicated a 50/50 chance of a rate cut in September down from 60%. Data released showed that GDP had increased on an annualised basis by 3% in Q2 after Q1 showed a shrinking of 0.5%, experts put the swing down to companies front-loading of imports to avoid tariffs. Consumer spending advanced at its slowest pace over Q1 and Q2 since the pandemic.

Chairman Powell has made it clear that there is still room to hold rates, something that will no doubt send President Trump into a fit of rage. Data released since the FOMC’s last meeting on 17th – 18th June has given officials little reason to shift from their “wait and see” policy stance, which has been in effect since Donald Trump’s elevation to the White House. Whilst there will be a cornucopia of data between now and the September meeting of the FOMC, experts point out that the Jackson Hole Economic Symposium (in Kansas City) is being held between 21st – 23rd August. The Federal Reserve Bank of Kansas City hosts central bankers, policymakers, academics and economists from around the world, and Chairman Powell has been known to indicate forthcoming policy shifts, so perhaps financial markets and President Trump will get a peek into future Federal Reserve policy.

Tag: Interest Rates