Investors agree: The Fed fund futures market is predicting a 97% chance of the base interest rate being kept on hold at 4.25% to 4.5% this month. However, the same market is showing a 58% chance of a 0.25% point cut in September, the next time the Fed meets after this month.

That doesn’t mean that Powell and the Fed are ignoring Trump’s near-daily tantrums on Truth Social. How could they? Trump’s most recent post called Powell “the Worst Federal Reserve Chairman in History.” 

Republican Rep. Anna Paulina Luna has asked the Department of Justice to investigate whether Powell committed perjury in his description to Congress of renovations being made to the Fed’s headquarters. (The referral is extremely unlikely to result in an actual court case.)

While the market is now used to this kind of invective, it’s worth reminding ourselves that it is historically unprecedented for a U.S. president and his supporters to attack a central bank chief in this way. A recent note from Pantheon Macroeconomics called it “farcical,” a “sideshow,” and “lunacy.”

Nonetheless, despite the chaos, it appears that the Federal Open Market Committee (FOMC) is listening to the argument that interest rates should be lowered soon.

“Since the FOMC’s June meeting, most FOMC participants echoed Chair Powell’s comment that ‘as long as the U.S. economy is in solid shape, we think the prudent thing to do is to wait and learn more, and see what [the tariffs’] effects might be,’ though a few participants suggested that the time to adjust the stance of monetary policy might be approaching,” according to Goldman Sachs’ Jessica Rindels, writing in a note to clients this morning.

“While Governors [Michelle] Bowman and [Christopher] Waller said that they would support a cut at the FOMC’s July meeting, other participants suggested that they expect the next cut to come later given that inflation remains above target while the labor market appears healthy and uncertainty about the inflationary effects of tariffs remains,” she wrote.

The internal debate at the Fed is whether Trump’s tariffs have produced a one-off boost to inflation that will disappear or wether the effect is permanent, according to Rindels. The Fed is wary of getting this decision wrong because, infamously, it believed the post-COVID inflation would quickly fade—and it did not.

So it looks like the Fed will hold in July and cut in September. There’s one other factor moving in favor of a cut to rates: Inflation in the housing sector is in decline, which may give Powell et al. the elbow room they are looking for to lower rates.

Pantheon Macroeconomics

“One crumb of comfort for the Fed, amid attacks from President Trump and the policy dilemma raised by tariffs, has been the further fall in housing inflation, measured by the CPI owners’ equivalent and primary rent components,” Pantheon’s Oliver Allen said in a recent research note. “The big weight of housing in the CPI—a third of the headline index and 40% of the core—means lower housing inflation has shaved 0.2 pp from the headline rate in 2025 so far, and 0.25 pp from the core rate.”

Here’s a snapshot of the action prior to the opening bell in New York:

• S&P 500 futures were up 0.32% this morning after the index hit a new high, at 6,309.62, up 0.06% yesterday.
• The U.K.’s FTSE 100 was above 9,000, up 0.46% at 9,064.70 in early trading.
• STOXX Europe 600 was up 0.87% in early trading. 
• Japan’s Nikkei 225 shot up 3.51% on trade deal news. 
• China’s CSI 300 Index was up a wee 0.02%. 
• Bitcoin is still above $118K.