The Fed needs more data before cutting

Highlights

• The Fed meeting dampened expectations of a quick restart of policy easing. The FOMC acknowledged the visible signs of a growth slowdown but remains focussed on the upside risks to inflation due to tariffs. 
• Chair Powell stressed that “modestly restrictive” stance remains appropriate. Two members dissented from the decision not to cut in July, but most of the committee remains strongly in favour of waiting and seeing. 
• Given the large gap between the July and the September meeting the Fed will have two months of employment data before deciding and then next price figures will be very informative on the impact on tariffs.
• The speech at the Jackson Hole meeting (Aug. 21) will prove once again critical. The odds of a rate cut in September (our baseline so far) have reduced to just above 50-50, and we will review our call with the July employ- ment data. But we still see a terminal rate in the 3.25%-3.5% range.

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