US Fed To Declare Policy Verdict Today: Interest Rate To Dot Plot—5 Key Indicators To Watch

US Fed Policy: The US Federal Reserve is all set to announce its monetary policy decision on July 30, after a two-day review meeting to deliberate on the central bank's benchmark interest rate verdict and the state of the US economy.

This is the fifth policy verdict by the US Fed Chair Jerome Powell-led Federal Open Market Committee (FOMC) for 2025 and comes just before the Aug. 1 deadline when US tariff rates will be implemented for most nations.

Wall Street analysts broadly expect the US central bank to hold the key interest rate steady at 4.25%-4.50% again as policymakers stand firm on assessing the evolving US economic data, especially amid the global tariff jitters.

Notably, US President Donald Trump has consistently criticised Powell for the last several months for not cutting and reducing the federal funds rate and starting to ease the monetary policy cycle, which most central banks have done this year, including India's RBI.

"The focus will remain on maintaining the Fed's credibility in fighting inflation and anchoring long-term expectations," said Prashant Tandon, Executive Director, Global Investments, Waterfield Advisors.

Ahead of the US Fed policy verdict, investors and analysts alike will keenly watch out for some indicators that have a bearing on the Fed's decision-making process. To better understand the outcome, here are five key indicators that one should watch ahead of the US Fed verdict tonight.

Most Wall Street analysts believe that the tariff pressure has not yet translated into US inflation; however, they have warned that once the deals kick in from August, inflation in the US will increase and may stay elevated in the near term.

In its last meeting held in June, the Fed revised its inflation forecast, citing upside cost risks due to US tariffs. As per the latest estimates, the Fed eyes US inflation at 3.1% by the end of the year, above the current level.

The core CPI inflation rose 2.9% annually in June. The majority of Fed policymakers, though, remain concerned that Trump's tariffs could undo progress on bringing inflation back to the central bank's 2% goal.

The current federal funds rate has sat at a range of 4.25% to 4.50% since the beginning of 2025. Powell has kept the rates steady for four straight policy meetings. The central bank last cut interest rates on Dec. 18, 2024, by 25 basis points. The Fed's total rate cut size in 2024 was one full percentage point.

In September 2024, the Fed kicked off its policy easing cycle when the FOMC voted 11 to 1 to lower the interest rate after holding it at over a two-decade high for over one year. That was the Fed’s first rate cut in four years.

The US Fed maintained the key borrowing rate elevated at a 23-year high for 14 consecutive months since July 2023 to combat the worst inflation outbreak in almost 40 years. One bps equals one hundredth (1/100) of a percentage point.

In the June meeting, the Fed projected GDP growth of 1.4% in 2025, down 0.3% from the March meeting. The word on the street is that the US economy is expected to grow only by 1.8% in 2025, even more so because the Fed's hawkish stance so far this year has not supported the economic growth.

Latest government data showed that the US GDP rose 2.8% YoY. Despite this current growth pace, the outlook for the second half of the year is hazy. The labour market is slowing, which will impact wage gains.

The US unemployment rate is forecast to increase to 4.2% from 4.1% in June, pointing to a further slowdown in labour market activity. The Fed had last estimated unemployment rising to 4.5% by the end of the year. Uncertainty over where tariff levels will eventually settle has left several businesses hesitant to boost hiring.

In the June policy meeting, the projections from the Fed's quarterly ‘dot plot’ release showed that officials are expecting a 50 basis points, or 0.5%, interest rate cut in 2025. This chart holds data on each Federal Reserve official's expectations for where interest rates will head in the future.

In an exclusive interview, Dr. VK Vijaykumar, Chief Investment Strategist at Geojit Investments Ltd., told NDTV Profit that he expects "two Fed rate cuts in 2025 by 25 basis points each, perhaps by September and October."

After today's policy meeting, US Fed officials will meet on Sept. 16-17 to deliberate on the next set of decisions—which is when Wall Street, so far, has priced in the first Fed rate cut for 2025 in September.