EB Daily Market Report - Quick Update - Wednesday, July 30, 2025

There are just a few minutes until the latest Fed policy statement. Nearly all market participants are expecting no change in the fed funds rate, though I maintain my position that the Fed should have been cutting rates throughout 2025 as there are no signs of inflation. It has been moving lower consistently for 3 years and lowering interest rates would keep the Fed ahead of what could emerge as a weakening economy down the road.

It would make sense for the Fed to consider this morning's initial reading of Q2 GDP, which came in at 3.0% vs. the 2.5% consensus estimate, as another signal that the economy remains resilient. That's the primary reason that the Fed has kept rates unchanged in 2025 - the fact that the resilient economy allows them the ability to be patient when it comes to rate cuts.

My fear is that leaving rates higher for too long could have the unintended consequences of a slowing labor market later this year or into 2026 and there's no reason to take that chance if inflation is not problematic. All signs point right now to inflation NOT being problematic.

The big question today, and what most market participants will want to hear, is whether the Fed will consider a rate cut at their next meeting in September. Of course, there'll be the Fed's Jackson Hole speech in August prior to that policy decision, but do we see two Fed members dissent from today's likely "no change" stance. Both Fed Governors Christopher Waller and Michelle Bowman have publicly called for a rate cut. Do more Fed officials turn more dovish, given the lack of inflation data?

We'll find out all of this and more this afternoon and over the next few weeks.

Buckle up.

Happy trading!

Tom