Is the Fed likely to finally cut interest rates at this week's meeting?

During a meeting last week between President Trump and Federal Reserve Chair Jerome Powell, the president sought to underscore what he said is a "very simple" request: "Interest rates have to come down."

That wish isn't likely to be granted when the Fed announces its next interest rate decision on Wednesday. Economists put the probability of the central bank holding rates steady at 96%, according to FactSet. The Fed has maintained its benchmark rate in a range of 4.25% to 4.5% since December 2024, prior to Mr. Trump's second-term inauguration in January, as policy makers try to douse the flickering embers of inflation.

Mr. Trump has for months derided Powell over the Fed's caution in lowering borrowing costs, which experts say would boost economic growth but could cause consumer prices to flare. Upping the pressure, Trump administration officials also have said the Fed chair's handline of a building renovation at the Fed could be grounds for firing.

Despite such criticism, Powell has maintained his stance that no immediate rate cuts are necessary given that the economy remains solid. The Fed chair, who Mr. Trump nominated to head the central bank in 2017, has also suggested he wants to keep its powder dry in case the Trump administration's steep new tariffs cause inflation to reignite.

"With the labor market holding up and the impact of tariffs on inflation starting to rear its ugly head, the Federal Reserve has plenty of ammunition to justify keeping interest rates unchanged at the July meeting," Oxford Economics chief U.S. economist Ryan Sweet said in a July 24 research note.

In making his case for lowering interest rates, Mr. Trump has pointed to rate cuts earlier this year by the European Central Bank and the Bank of England, while also pointing out that U.S. inflation so far in 2025 has remained relatively low.

However, the Consumer Price Index — a key gauge for tracking inflation — in June rose to an annualized rate of 2.7%, well above the Fed's 2% annual target and a sign that that tariffs could be pushing some prices higher.

Fed policy makers are meeting this week to discuss what to do on interest rates. Here's what to know.

The Federal Reserve will make its next rate cut decision at 2 p.m. ET on Wednesday, July 30, followed by a 2:30 p.m. ET press conference with Powell, when he will offer his view on the the state of the economy and answer questions from financial journalists about the Fed's economic outlook.

The decision is made by the 12-person Federal Open Market Committee, or FOMC, with a voting majority deciding whether the central bank should cut, hike or maintain the benchmark rate. In other words, no single person, including Fed Chair Powell, determines the central bank's monetary policy.

Lately, at least two members of the FOMC — Federal Reserve governors Christopher Waller and Michelle Bowman — have signaled their belief that it is time to cut rates.

"[I]f there were a pair of dissents in July, it would match the most since 1993," Sweet of Oxford Economics noted.. "From our perspective, dissents are normal and a good thing as it highlights that the Fed isn't falling into the trap of groupthink."

It's not impossible, but highly unlikely. Economists estimate the chances of a rate cut at just 4%, according to FactSet. CME FedWatch, a closely watched monetary policy tracker, also suggests only a very remote probability of a cut.

For now, data continues to shows steady, if slowing, economic growth, with employers in June hiring more workers than forecast and inflation remaining relatively muted. Economists expect the Commerce Department on Wednesday to report that second-quarter GDP rose by 1.8%, below 2024's 2.8% rate.

With economic clouds on the horizon, the Fed is expected to hold off on cutting rates to give them room to maneuver if conditions deteriorate, economists note.

Interest rates are the Fed's most powerful tool for nudging growth forward when the economy slows and cooling activity when inflation jumps. A rate hike makes it more expensive for consumers and businesses to borrow, curbing spending and putting the brakes on inflation. By contrast, cuts make it cheaper to borrow, fueling spending and corporate investment, which can spark inflation.

"Policymakers remain cautious, navigating persistent inflationary risks tied to trade policy along with cooling labor market conditions and growing political pressure from the administration to accelerate rate cuts," EY-Parthenon Chief Economist Gregory Daco said in an email.

Powell has repeatedly stated that the Federal Reserve's decisions are based solely on economic data as it pursues its dual mandate of keeping inflation low and ensuring full employment.

Because Mr. Trump has been pushing for lower rates, Powell is likely to face questions at his press conference Wednesday press about political pressure. Powell may also be asked about the president's remarks about replacing him as Fed chair, he added. Powell's current term as chair ends in May 2026.

"The odds are that [Powell] sticks with his mantra that it doesn't impact monetary policy and he isn't resigning while dodging questions about a shadow Fed chair," Sweet said, referring to the possibility that Mr. Trump could decide to nominate Powell's successor months before he is due to step down in hopes of influencing investor expectations for monetary policy.

The Fed is more likely to lower its benchmark rate at its Sept. 16-17 meeting, according to FactSet, with economists pegging the likelihood of a cut at 63%. The FOMC doesn't meet in August, making the September meeting the next chance for a rate cut.

Economists who predict a rate cut at the September meeting are forecasting a 0.25 percentage point reduction, which would take the federal funds rate down to a range of 4% to 4.25%.

"With no imminent need to act.. the Fed will likely wait until September to deliver the next 25 [basis point] rate cut," Daco said. "We continue to expect two rate cuts in 2025, followed by a further 100bps of easing in 2026 as economic and labor market conditions deteriorate more visibly."

• Jerome Powell
• Interest Rates
• Federal Reserve