02:52 PM EDT, 07/29/2025 (MT Newswires) -- The Federal Open Market Committee is widely expected to maintain the range for its federal funds rate at the current 4.25% to 4.50% at its meeting this week, but changes in the wording of the statement or Federal Reserve Chairman Jerome Powell's post-meeting comments could ignite serious conversation about a rate cut at the September meeting.

Currently, the CME's FedWatch Tool sees a 97.9% chance of no change to the current target range and a 2.1% chance of a 25-basis point rate reduction to a range of 4.00% to 4.25%.

The FOMC's statement following Wednesday's meeting is due for release at 2:00 pm ET, with Powell's press conference scheduled to begin at 2:30 pm ET.

With no update to the Summary of Economic Projections at this week's meeting, the words will be the key focus.

Since the June meeting, there has been divided opinions among Fed officials on the timing of the next rate cut, with the level of expected inflation due to the Trump Administration's tariffs plans the key factor.

On July 1, Powell said that the FOMC would likely have lowered rates by this point if the larger-than-expected tariffs had not been rolled out, noting the shift higher in inflation expectations at that time. The size of those tariffs has been reduced in many cases. However, until the outlook becomes clearer, Powell has frequently cautioned that prudence is the best course of action.

"As long as the economy is in solid shape, we think the prudent thing to do is wait and learn more and see what those effects might be, and they haven't really shown up right now, so we're waiting," Powell said in his July 1 comments, though he declined to rule out a reduction at this week's meeting.

On the other hand, Fed Governor Christopher Waller has been a supporter of resuming a reduction of rate at the July meeting, saying as recently as July 17 that the FOMC should view the tariff impacts as temporary and focus on underlying inflation.

"If the slowing of economic and employment growth were to accelerate and warrant moving toward a more neutral setting more quickly, then waiting until September or even later in the year would risk us falling behind the curve of appropriate policy," Waller said at that time. "However, if we cut our target range in July and subsequent employment and inflation data point toward fewer cuts, we would have the option of holding policy steady for one or more meetings."

Waller also said that he would support further rate cuts at the following meetings if underlying inflation remained contained.

Fed Vice Chair for Supervision Michelle Bowman has also been vocal that a rate cut is possible at the July meeting, opening up the chance for two dissents by member of the Board of Governors this week if the FOMC chooses not to lower rates at this meeting.

The Summary of Economic Projections released on June 18 indicated a median expectation of two rate reductions over the next four meetings.

Data since then have indicated steady employment growth but also an uptick in the pace of consumer price inflation, allowing for another pause at the July meeting and a reduction in September if the inflation data do not continue to trend higher.

Currently, there is a 64.1% chance being priced in for 25-basis point rate reduction at the Sept. 16-17 meeting and a 35.9% chance of no change to the current rate.

Two of the FOMC's key data inputs -- the PCE price measures and employment data -- will be released later in the week after this week's meeting.