AUGUST 4, 2025 – RATES REMAIN UNCHANGED, TWO GOVERNORS DISSENT
As expected, there was no change in interest rates at the Federal Reserve meeting last week. Fed Chair Powell said they need to see the impact tariffs will have on the economy before taking action. Unusually, the decision was not unanimous. Fed Chairs Waller and Bowman disagreed; it was the first time in over 30 years that multiple governors voted no to the decision. Powell is worried inflation from tariffs will persist, rather than be “short lived”, and for that, the status quo is appropriate.
Later last week, GDP data came out showing the economy grew at 3 percent in the second quarter, up from a 0.5 percent contraction in Q1. Combined the economy grew at 1.2 percent in the first half of the year, this compared to 2.5 percent at the same point in 2024.
Employment data came out Friday, showing the addition of 79,000 jobs in July. However, overriding that number was the adjustments made to previously reported jobs in May and June. Originally, a total of 277,000 new jobs were created, the figure has now been adjusted down to 24,000. Three months of low job growth is usually seen under recessionary conditions. The unemployment rate rose slightly to 4.2 percent from 4.1 percent last month. The weak jobs report raises the likelihood of a September rate cut. Though the Fed will see one more job report and two consumer inflation reports before the next meeting.