JULY 2, 2025 – The next FOMC meeting is July 29th and 30th. I believe the rate decision is announced on the second day – i.e. July 30th.
As I have informed you for years, the market dictates the Fed Funds Rate. The Fed simply follows with an announcement moving it towards where the market says it should be.
Currently, the Fed Funds Rate ranges from 4.25% to 4.5% with the effective rate being 4.33%. The market has the Fed Funds Rate set at 4.1%-4.3%.
The market says there is a 25% chance of a rate reduction. Based on the above, there is no need for the Fed to reduce the rate. Maybe a 1/8% reduction can be justified. But, I believe it has only been moving the FFR in 1/4% increments. Due to the extreme pressure from the outside, and Trump supporters on the FOMC, I would not be surprised to see a 1/4% reduction. A range of 4.0%-4.25% would fit the current market range well.
The market’s 25% expectation is probably right on target. This likely comes down to Powell saying hey the Fed is independent and I will not bow to this pressure. Or him saying what the heck, let’s appease the world and lower the FFR 25 basis points.
I have no opinion to offer. I let the market make the decision for Powell. With 4 weeks to go, the market could easily bring the rate range down another 10 or 20bp and make the 1/4% reduction a slam dunk. Or raise rates and make no change the slam dunk. Let the market tell us. Ignore the pundits who are just guessing.
Shalom,
The Mann