US | FOMC majority unlikely to support near-term rate cuts

Summary

We expect the Fed to leave rates unchanged at this week’s meeting and do not anticipate growing dovish support. The uncertainty over the end level of tariffs and its inflation impact, along with a still solid labor market, give the Fed room to wait.

Key points

• Key points:
• Incoming data since the June FOMC meeting continued to depict a resilient economy, though with some signs of slowing momentum.
• A solid labor market keeps pressure off for now; it is likely still too soon for the Fed to view the economy as at risk of moving worryingly away from full employment.
• Inflation data have continued to point to limited tariff-related effects, though early signs suggest those price pressures may be gradually building.
• A couple of members signaled openness to easing as soon as this meeting, but they appear to have little support from the rest of the FOMC at this point.
• Earlier this month, the futures market had priced in up to a 60% chance of at least three rate cuts this year, but it has since declined to ~20%.

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