In Line With Expectations, But Far From Calm — Fed Holds Rates Steady Once Again

TradingKey - On Wednesday afternoon (U.S. Eastern Time), the Federal Reserve once again delayed a rate cut, a decision widely anticipated by markets. This marks the fifth consecutive meeting at which the Fed has held rates steady, keeping the benchmark federal funds rate unchanged in the 4.25%–4.50% range.

Following the decision and Chair Jerome Powell’s press conference, markets reacted sharply:

• The 2-year Treasury yield rose, approaching 3.95%.
• Gold prices dropped more than 1.7%, falling to $3,270 per ounce.
• The S&P 500 declined 0.45%, while the Nasdaq flipped from gains to a 0.1% loss.

Though the outcome was expected, the meeting was far from smooth. Two Fed officials — Christopher Waller and Michelle Bowman — voted to cut rates, breaking from the majority. In his press conference, Powell noted that the dissenters were expected to explain their views in the coming one or two days. He said it was not surprising to see differences, adding, “Two members believe it’s time to begin easing. I think this was a successful meeting.”

Notably, Nick Timiraos, widely regarded as the “New Fed Whisperer,” wrote in a post-meeting analysis that the Fed made almost no changes to its policy statement, signaling it has no intention of hinting at an imminent rate cut.

Analyst Chris Anstey highlighted Powell’s cautious tone:“There are many, many uncertainties left to resolve. Yes, we’re getting more data all the time. But we’re not that close to the end of this process. Looking ahead, it feels like a lot more will happen.”This language leaned hawkish, reinforcing market expectations of further delay.

When questioned about the September meeting, Powell avoided giving any forward guidance, stating only that upcoming data will guide policy decisions. This ambiguity reinforced the hawkish undertone of the session, pushing the 10-year Treasury yield higher.

Powell also addressed inflation, saying it remains further from the Fed’s 2% target than the labor market, and noted that Spreads blew out 30 to 40 basis points on Trump's tariff news — an indirect explanation for the delay in rate cuts, and one that sidesteps direct political confrontation with Trump.

Market expectations for a September rate cut have cooled significantly:

• Probability of a cut in September dropped to 49.6%, down from around 60% before the decision.
• Full-year rate cut expectations have been revised down to 36 basis points, from 44 bps earlier.

[Target Rate Probabilities for 17 9/2025 Fed Meeting Source:CME Group]

When asked whether he would seek to stay on after his term ends, Powell said, “I have nothing to say.”

Looking ahead, as long as Powell remains at the helm, the Fed is likely to maintain a cautious, data-dependent stance. The path to policy easing remains unclear, and the timing of the first rate cut is now more uncertain than ever — suggesting that market volatility may persist.