While the Federal Reserve’s decision to hold interest rates steady was widely anticipated, a rare dual dissent and nuanced language in the FOMC statement have left experts divided on whether Chair Jerome Powell will hold steady through 2025 or embark on aggressive rate cuts.
What Happened: Highly critical of the Fed, Louis Navellier, the founder and chief investment officer at Navellier & Associates, asserted, “The Fed lives in a delusional world. They’re not reading the data.”
He contends that despite a weakening economy and five straight months of inflation coming in below expectations, the Fed is reluctant to act. Navellier boldly predicts the Fed “has to cut six times,” starting in September, to bring the federal funds rate to 3%.
He attributes falling inflation to factors like “deflation in China” and a global economic slowdown, making price increases difficult.
Conversely, Bill Adams, the chief economist for Comerica Bank, highlighted the FOMC’s shift in language, acknowledging that “growth of economic activity moderated in the first half of the year.”
Despite this, Comerica forecasts the Fed to “hold the federal funds target unchanged for the next two decisions.” Adams notes that Chair Powell emphasized the need for more jobs and inflation data, stating, “We have made no decisions about September. We don't do that in advance.”
However, others see a September cut as increasingly likely. Chris Zaccarelli, the chief investment officer for Northlight Asset Management, observed that Chairman Powell “dropped some hints in his press conference that a rate cut was more likely at the next meeting in September.”
Jeffrey Roach, the chief economist for LPL Financial, concurred, stating the committee “set the stage to take action at the next meeting. If economic conditions weaken, the committee will likely cut rates by a quarter point in September.”
Why It Matters: The internal friction within the Fed, marked by Governors Michelle Bowman and Christopher Waller dissenting in favor of an immediate 25-basis-point cut, underscores the divergent views.
While President Donald Trump‘s pressure for cuts is evident, experts largely agree that Powell’s legacy and independence from political influence will guide the Fed’s decisions.
The path ahead remains uncertain, with market participants eagerly awaiting incoming data to discern if Powell will maintain his patient stance or yield to growing calls for more aggressive easing.
Price Action: The CME Group's FedWatch tool‘s projections show markets pricing a 60.8% likelihood of the Federal Reserve keeping the current interest rates unchanged for the Sept. 17 decision.
The SPDR S&P 500 ETF Trust (NYSE:SPY) and Invesco QQQ Trust ETF (NASDAQ:QQQ), which track the S&P 500 index and Nasdaq 100 index, respectively, were trading higher in premarket on Thursday. The SPY was up 1.02% at $640.91, while the QQQ advanced 1.36% to $640.91, according to Benzinga Pro data.
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Disclaimer: This content was partially produced with the help of AI tools and was reviewed and published by Benzinga editors.
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