Economists: Federal Reserve unlikely to drop interest rates

July 30 (UPI) — The United States Federal Reserve will release its interest rates decision Wednesday, but it’s unlikely to cut rates, economists say.

The economy is mostly unchanged since last month, and the effects of President Donald Trump‘s tariffs are just beginning to take effect. So the Federal Open Market Committee is likely to stay the course until September.

Trump has waged a verbal war against Fed Chair Jerome Powell, demanding that he lower interest rates or resign. Trump has even suggested he might fire Powell, whose term on the FOMC ends in May 2026.

“They’re not going to get anything if they ease, other than they’ll look like they’re knuckling under to the president,” Bill English, the Fed’s former head of monetary affairs and now a professor at the Yale School of Management, told CNBC. “So I think their best policy for sure is just to look at the data, make their best judgment, make their policy decision and explain it as well as they can.”

For the first time since 1993, two FOMC governors could dissent against keeping the rates where they are. Governors Christopher Wallen and Michelle Bowman have backed Trump’s call for a rate cut.

“It’s a long way to September,” Morgan Stanley said in a note to clients. “The Fed needs more time to determine how the economy is evolving versus its goals.”

Oxford Economics Chief U.S. Economist Ryan Sweet said he doesn’t expect the “central bank to tip its hand, as it will want to remain flexible because of the lingering uncertainty of where tariffs will ultimately settle, the magnitude of the boost to core goods prices, and whether tariffs are bleeding into other prices.”

Last year, the Fed lowered its benchmark short-term rate by one percentage point after a pandemic-related inflation spike eased but has since been on hold. But the imposition of tariffs on imported goods makes economists expect an inflation boost and slowed growth.

Tariffs have had little effect on inflation so far, but they were beginning to be felt by consumers in June because Chinese-made products got more expensive, according to the consumer price index. But that’s because retailers and manufacturers loaded up on goods before the tariffs went into effect or took the costs on themselves. Forecasters say this isn’t likely to continue.