Several key economic indicators were released in late July, the most important being the initial reports on Q2 GDP growth. While the Commerce Department announced a 3.0% annualized growth in Q2, up from a 0.5% contraction in Q1, that adds up to only 1.2% growth for the first half of the year. That compares with last year’s full-year growth rate of 2.8%. With Q2 consumer spending growing at a 1.4% pace, business investment in equipment slowing significantly, and home building and house sales contracting for a second quarter in a row, the Federal Reserve opted not to cut interest rates at its July meeting.
The labor market is “solid” and inflation “somewhat elevated,” according to the Fed — and though Fed Chair Jerome Powell is concerned about tariff uncertainty, it’s still too early for predictions, as most companies haven’t raised prices yet (meaning businesses are bearing the burden of higher import costs so far). Thus, despite pressure from the White House, the Fed held the benchmark federal funds rate at 4.25–4.5%. (Interestingly, for the first time in three decades, two governors dissented, recommending a 0.25%-point reduction.)
(Updated 7/31/25)
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