July rate cut from Fed is 'now completely off the table' following solid jobs report
The odds of a rate cut at the Federal Reserve's next meeting evaporated after a resilient jobs report for June alleviated concerns about a slowing US economy.
"You are not getting a July rate cut — that is now completely off the table," Joe Brusuelas, RSM chief economist, told Yahoo Finance.
Traders agree with that assessment. On Thursday morning, the odds of a cut at the Fed's July 28-29 meeting fell near 5% from nearly 25%, according to the CME FedWatch tool.
"The markets are speaking," Interactive Brokers chief strategist Steve Sosnick added. He told Yahoo Finance the likelihood of a Fed cut was "evaporating" in the aftermath of the latest labor market report from the Bureau of Labor Statistics.
The report showed the US economy added 147,000 nonfarm payrolls in June, more than the 106,000 expected by economists. The unemployment rate unexpectedly fell to 4.1%. Economists had expected the unemployment rate to move higher to 4.3%.
Federal Reserve Chairman Jerome Powell has cited a resilient economy as he argues for a patient approach to rate cuts. The strength of the US economy, he has said, gives the Fed time to assess whether President Trump's tariffs will, in fact, push inflation higher over the summer.
Brusuelas of RSM said the jobs report "is feeding right into what Jerome Powell said," namely that the economy is "not in trouble right now."
Trump has repeatedly pressured Powell to stop waiting and start cutting again, making that case again this week.
The case for looser monetary policy being made by the White House is "a tough sell," Sosnick said. "'The economy is great but we need rate cuts at the same time.' That’s cognitive dissonance.'"
Read more: How much control does the president have over the Fed and interest rates?
But Fed watchers expect the White House pressure campaign to continue. Brusuelas noted that the criticism is now being aimed not just at the Fed but at the entire Fed board.
Trump said Powell "should resign immediately" in a Truth Social post Wednesday night. On Monday, he posted a note he sent to Powell telling the Fed chair, "Jerome—You are, as usual, 'Too Late,'" and arguing that he has "cost the USA a fortune."
Federal Reserve Chair Jerome Powell speaks with Fed governor Michelle Bowman on June 25. (Saul Loeb/AFP via Getty Images) · SAUL LOEB via Getty Images Trump on Truth Social also widened his criticism to the entire Fed board: "The Board just sits there and watches, so they are equally to blame."
Fed governors Christoper Waller and Michelle Bowman have both made a case for rate cuts in July since the last Fed meeting, arguing that any inflation from tariffs will not linger.
La historia continúaRead more: How the Fed rate decision affects your bank accounts, loans, credit cards, and investments
But others have urged more patience. Atlanta Fed president Raphael Bostic said in a speech Thursday in the UK that he "fully supports" the Fed's wait-and-see policy prescription.
"I believe the Committee must await more clarity rather than move in a policy direction that it might need to quickly reverse," Bostic said.
For now, job market conditions remain broadly healthy, he added, even as signs point to softening. Bostic pointed out that the pace of hiring has slowed but that layoffs and unemployment remain at low levels.
"I don't yet see signs of serious labor market deterioration," he said.
Atlanta Federal Reserve President Raphael Bostic in 2019. (Reuters/Christopher Aluka Berry/File Photo) · REUTERS / Reuters Bostic said if not for the potential impact of tariffs on prices — as well as the consequences of the current turmoil in the Middle East — he would be "pretty comfortable" with the inflation outlook.
"For me, the main punchline is that the adjustment of prices and the broader economy to changes in trade and other forthcoming policies in the United States, along with geopolitical developments, is not going to be a short and simple one-time shift in prices, as standard textbook models would suggest," he said.
"Instead, this increasingly looks like a process that may take a year or more to fully play out."
Earlier this week, Powell didn't rule out an interest rate reduction at the Fed's next meeting on July 28-29, but he noted the central bank would have cut rates by now if not for the tariffs introduced by the Trump administration.
"We went on hold when we saw the size of the tariffs and essentially all inflation forecasts for the United States went up materially as a consequence of the tariffs," he said.
The Fed lowered rates by a full percentage point in 2024 but has held rates steady so far in 2025.
"I wouldn't take any meeting off the table or put it directly on the table," Powell said when asked about the possibility of a cut in July. "It's going to depend on how the data evolved."
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