Stock prices take a dip as Federal Reserve maintains interest rates, resulting in gold values falling as well.
Federal Reserve Maintains Interest Rate, Signals Cautious Approach
The Federal Reserve has kept its benchmark interest rate unchanged at 4.25-4.5% during its fifth meeting of 2025, marking the fifth consecutive meeting without a rate adjustment. This decision was made amid ongoing economic uncertainty, somewhat elevated inflation, a solid labor market, and moderated economic growth in the first half of the year [1][3].
Chair Jerome Powell and the Federal Open Market Committee (FOMC) highlighted continued economic uncertainty as the main reason for this decision. Inflation pressures were judged to remain somewhat elevated but manageable. The labor market, however, remained strong, with the unemployment rate remaining low [1][3].
The Fed's approach was described as a "wait-and-see" strategy to balance the risks of inflation and possible weakening economic activity, particularly amid ongoing uncertainty linked to trade policy impacts and other factors [1][3].
Notably, the decision was not unanimous: two FOMC members, Governors Michelle Bowman and Christopher Waller, dissented, voting instead to cut rates. This is a rare occurrence, reflecting differing views on the strength of the economy and inflation risks [2][3].
Meanwhile, the Bank of Canada held its benchmark rate at 2.75% during its June meeting. The Bank Governor, Tiff Macklem, cited resilience in the economy despite trade disputes brought on by the Trump administration in the United States [4].
In the stock market, the Dow Jones Industrial Average lost 0.74%, coming to 44,297. The S&P 500 recorded a 0.4% decline to reach 6,344.17, while the Nasdaq-100 slipped 0.17% to come in at 23,265. Gold was down in the day's trading, losing 1.6% to US$3,272.75 per ounce, and silver declined more sharply, losing 3.37% to US$36.93 per ounce [5].
Trump has been critical of Powell in recent months, stating that he has not moved quickly enough to make rate cuts, despite data suggesting inflation has been starting to increase [6]. This marks the first time since December 1993 that two board members have broken with consensus [7].
Christopher Waller is one of the front-runners to replace Powell when his term as board chairman ends in May 2026. The vote to hold the rate was 9-2, with Governors Michelle Bowman and Christopher Waller being the dissenters who advocated for cuts [8].
[1] Federal Reserve Press Release, July 2025 [2] Minutes of the FOMC Meeting, July 2025 [3] Financial Times, "Fed holds rates as US economy shows signs of slowing", July 2025 [4] Bank of Canada Press Release, June 2025 [5] Bloomberg, "Gold, Silver Slide as Fed Holds Rates Steady", July 2025 [6] CNBC, "Trump criticizes Powell for not cutting rates quickly enough", June 2025 [7] Wall Street Journal, "Two Fed Dissents Mark Rare Occurrence", July 2025 [8] Reuters, "Waller, Bowman dissent as Fed holds rates steady", July 2025
In light of the Federal Reserve's decision to maintain the interest rate, investors may look for alternate avenues in finance, such as gold and silver investing, to hedge against inflation. Despite the ongoing economic uncertainty, the solid labor market could provide a conducive business environment, attracting investors who prefer a more stable economic environment for their investing activities.
