Wall Street reactions as Federal Reserve holds interest rates steady

In search of a rate cut.

The Federal Reserve left interest rates unchanged at its policy meeting today. At a range of 4.25% to 4.50%, interest rates have been unchanged since the Fed’s December 2024 meeting.

“Inflation remains elevated,” the Federal Open Market Committee (FOMC) said in its statement. Christopher Waller and Michelle Bowman both dissented, preferring a cut in the Fed funds rate.

Fed Chairman Jerome Powell — under tough scrutiny from President Trump, who is demanding rate cuts — will undertake arguably his most important press conference.

Investors will be keyed in on whether Powell signals a rate cut at the Fed’s September meeting. If he doesn’t, pros say stocks could pull back a bit from records.

Attention will now turn to the Fed’s Jackson Hole Economic Policy Symposium on August 21-23. This year’s theme is “Labor Markets in Transition: Demographics, Productivity, and Macroeconomic Policy,” which, on paper, sets the stage for Powell to signal the timing of rate cuts.

“The gap between the July and September meetings is the longest in the Fed’s calendar of eight FOMC meetings per year,” said Morgan Stanley chief US economist Michael Gapen. “The long gap between July and September meetings means the Fed will see several months worth of additional data and have plenty of opportunity to signal its intent in advance.”

Gapen continues to expect no rate cuts from the Fed this year.

Here is what Wall Street is saying about the closely watched Fed decision.

“A mystery of the June FOMC statement, in light of all the tariffs on and off, was when they said ‘Uncertainty about the economic outlook has diminished but remains elevated.’ Today they took out the word ‘diminished’ and just left ‘Uncertainty about the economic outlook remains elevated.'”

“There are going to be more tariffs that’s going to further erode demand as we move forward. I have been arguing that the Fed has the room to move from a moderately restrictive monetary policy stance to a more neutral stance, because I believe the tariff shock will be a one-off effect.”

“The characterization of the unemployment rate as low and inflation as elevated remained the same. Uncertainty is also still characterized as elevated. In our view, the change in the characterization of growth is only modestly dovish as the description of the labor market continues to note that unemployment is low, and labor market conditions ‘remain solid.’ Also, the rate guidance about ‘extent and timing of additional adjustments to the target range…’ is unchanged. Neither of these suggests action in September is more likely than it was before.”