Members of the Federal Open Market Committee (FOMC) voted to reduce the benchmark federal funds rate by 25 basis points, setting the new target range at 4 percent to 4.25 percent. The Fed statement was clear, with one dissenter, Stephen Miran, who recently joined.
“Recent indicators suggest that the growth of economic activity moderated in the first half of the year. Job gains have slowed, and the unemployment rate has edged up but remains low. Inflation has moved up and remains somewhat elevated,” the FOMC said in a statement.
The market was widely expecting a 25 basis point cut in rates, as our computer has been forecasting for months that any cut would be in September, not before. However, there were the typical groups of questionable analysts touting that a 50 basis point cut could lead to a more significant market rally.
With the prospect of war on the horizon and a sovereign debt crisis brewing in the EU, there are realistic expectations for a continued decline. The risk is that Trump will interfere in the Fed, leading to a loss of confidence worldwide, which would result in unrealistic interest policy into early 2026. There remains the risk of another cut during the next quarter.
