The Federal Reserve leaves interest rates unchanged

Summary

Marketplace Morning Report: The Federal Reserve Leaves Interest Rates Unchanged Released: July 31, 2025

In this episode of the Marketplace Morning Report, Host David Brancaccio delves into the Federal Reserve's recent decision to maintain interest rates, the burgeoning advancements in artificial intelligence within major tech companies, significant developments in international tariff agreements, and the ongoing impact of immigration enforcement on the U.S. labor market. The episode provides comprehensive insights into these critical economic and business topics, enriched with expert commentary and notable quotes.

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Federal Reserve's Decision on Interest Rates

00:59 - 03:00

David Brancaccio opens the discussion by addressing the Federal Reserve's recent meeting where the committee decided to keep interest rates unchanged. Despite the resilient economy and uncertain effects of tariffs, the decision was not unanimous, highlighting internal debates within the Fed.

Nancy Marshall Genzer, reporting from the Fed briefing, explains:

"Fed Governors Michele Bowman and Christopher Waller were the dissenters. They wanted a quarter percentage point cut at this meeting. This is very rare. We haven't had this many Fed governors dissenting since 1993." (01:26)

The majority, led by Jerome Powell, advocated for maintaining rates to prevent exacerbating inflation, which remains above the Fed's 2% target.

Jerome Powell emphasized:

"I will say what you hope is that people, you know explain their positions very thoughtfully and clearly. And we absolutely had that today all the way around the table." (02:11)

Powell clarified that the Fed does not commit to future rate changes in advance, instead relying on incoming data, including employment and inflation reports, to guide future decisions. He also mentioned the ongoing scrutiny of tariffs' impact on inflation, noting:

"Their overall effect on inflation remains to be seen." (02:35)

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Tech Giants Embrace Artificial Intelligence

03:00 - 04:19

Brancaccio shifts focus to the tech sector, highlighting significant investments in artificial intelligence by major companies. The episode notes impressive premarket stock increases, with Microsoft rising over 8% and Meta (Facebook) surging 12%, buoyed by their optimistic sales forecasts and AI advancements.

Key points include:

• Meta's adoption of the term "superintelligence" to describe its AI initiatives.
• Upcoming quarterly results for Amazon and Apple are anticipated to influence market movements further.

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International Tariff Agreements

04:19 - 05:27

The discussion transitions to recent tariff agreements, with Jean Mackenzie reporting from Seoul on new deals involving Thailand and Cambodia. Notably, South Korea has agreed to the U.S. 15% import tax on its products, aligning its tariff rates for cars and semiconductors with those previously set for Japan.

Jean Mackenzie elaborates:

"Seoul sells more to the US than any other country other than China, and far more than it buys in return. So this deal was vitally important." (03:46)

However, the agreement does not address the costs associated with U.S. troops stationed in South Korea, which play a crucial role in the region's defense dynamics.

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Impact of Immigration Enforcement on the Labor Market

05:44 - 08:35

A significant portion of the episode is dedicated to exploring how the Trump administration's intensified immigration enforcement, including ICE raids, has influenced the U.S. labor force. Mitchell Hartman reports on declining labor participation rates and the broader economic implications.

Key insights include:

• The Bureau of Labor Statistics reported a decline in the labor force by over 750,000 in recent months, with a notable reduction of 382,000 in the foreign-born segment (06:16).
• Economist Joe Bruceuelis attributes this decline to decreased border crossings and increased arrests and deportations under the Trump administration.
• Ray Perryman, an economist in Texas, notes severe labor shortages in sectors like agriculture, food, and construction, where foreign-born workers constitute a significant portion of the workforce. He states:

  "We've really come to rely on the workforce from Mexico to a very large extent." (07:32)

The reduction in available workers is expected to lead to higher wages as employers compete for a smaller pool of labor, potentially fueling inflation—a concern for the Federal Reserve.

Haley Brown from the Center for Economic and Policy Research adds:

"And the impact will be different from state to state depending on how much of their labor force is foreign born." (07:57)

The episode emphasizes that high-skilled sectors are also vulnerable, with professional and business services heavily dependent on foreign-born workers, making the labor market more competitive globally.

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Looking Ahead

08:35 - 08:53

David Brancaccio wraps up the main content by teasing upcoming segments, including a half-hour program featuring Kai Ryssdal discussing money, careers, and innovation. He encourages listeners to stay tuned for more in-depth analysis on these topics.

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Notable Quotes Recap

• Nancy Marshall Genzer (01:26): "Fed Governors Michele Bowman and Christopher Waller were the dissenters. They wanted a quarter percentage point cut at this meeting. This is very rare. We haven't had this many Fed governors dissenting since 1993."

• Jerome Powell (02:11): "I will say what you hope is that people, you know explain their positions very thoughtfully and clearly. And we absolutely had that today all the way around the table."

• Jean Mackenzie (03:46): "Seoul sells more to the US than any other country other than China, and far more than it buys in return. So this deal was vitally important."

• Ray Perryman (07:32): "We've really come to rely on the workforce from Mexico to a very large extent."

• Haley Brown (07:57): "And the impact will be different from state to state depending on how much of their labor force is foreign born."

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This episode of the Marketplace Morning Report offers a thorough examination of pivotal economic issues, from Federal Reserve policies and tech sector advancements to international trade agreements and labor market dynamics influenced by immigration policies. Through expert interviews and detailed reporting, listeners gain a nuanced understanding of the forces shaping the current economic landscape.

Transcript

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[David Brancaccio]

The Federal Reserve Chorus was not singing from the same hymnal. I'm David Brancaccio in Los Angeles. The guardians of interest rates at America's central bank decided now is not the moment to cut interest rates, given the uncertain effects of tariffs and a resilient overall economy. But the committee's decision yesterday was not unanimous. Two people dissented. Our Nancy Marshall Genzer was at the Fed briefing yesterday. Hey Nancy.

[Nancy Marshall Genzer]

Hey David. Well, Fed Governors Michele Bowman and Christopher Waller were the dissenters. They wanted a quarter percentage point cut at this meeting. This is very rare. We haven't had this many Fed governors dissenting since 1993, according to account by the St. Louis Fed.

[David Brancaccio]

Now, Powell likes to let others on his team speak for themselves and not quote discussions. But what was the dissenting case made for cutting rates now, not waiting as they decided?

[Nancy Marshall Genzer]

Well, Powell says the majority view was that inflation is still above the Fed's 2% target and you need to keep interest rates where they are because cutting them prematurely could feed inflation. But Powell told me everyone at the meeting gave their opinion.

[Jerome Powell]

I will say what you hope is that people, you know explain their positions very thoughtfully and clearly. And we absolutely had that today all the way around the table. I would call it one of the better meetings I can recall.

[David Brancaccio]

Now, Team Fed did not double pinky swear promise to definitely cut rates at the next meeting in September. It's about what the data says happens between now and then.

[Nancy Marshall Genzer]

Oh yeah, Chair Powell made that very clear yesterday. He said the Fed does not make interest rate decisions in advance and we'll be getting a fair amount of data over the next few months. Powell pointed out we'll be getting two employment and two inflation reports between now and the September meeting. He's also keeping an eye on tariffs, and he's said they've started to show through on some prices, but their overall effect on inflation remains to be seen.

[David Brancaccio]

Nancy, thank you. Tech companies are spending massive amounts developing artificial intelligence, and the quarterly results are starting to show returns for two big players. Microsoft stock up more than 8% in premarket trading now. Meta Facebook is up 12% with its forecast that sales will be higher than expected. It's embracing the word superintelligence for its AI work. Amazon and Apple reveal their spring into summer results after the market market closes today. U.S. officials say a couple more countries have agreed to tariff deals, Thailand and Cambodia. Details are few there, but we do know that South Korea is on board the US putting a 15% import tax on its products. Korea gets the same tariff rate for cars and semiconductors as Japan. Jean Mackenzie reports from Seoul.

[Gene McKenzie]

When Japan and the EU secured 15% deals last week, South Korea was suddenly under pressure to achieve the same Seoul sells more to the US than any other country other than China, and far more than it buys in return. So this deal was vitally important. It's being touted as a success here because Seoul didn't have to bend to requests from the US to allow it to sell more rice and beef here. What this deal doesn't cover is the cost of thousands of US Troops stationed in South Korea who help defend it from the North.

[David Brancaccio]

Gene McKenzie is with the BBC in Seoul.

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This Marketplace podcast is supported by Mercury. Mercury is the FinTech More than 200,000 businesses use to protect their money and power their financial workflows. Learn [e-mail] There are weather forecasters, right?

[David Brancaccio]

And there are professional job forecasters who predict we'll see less hiring when the official July report comes out tomorrow morning. We'll also be tracking people actively looking for work versus those who've stopped looking for now that overall size of what the government defines as the labor force fell sharply in May and June. Warning signs. Trump administration ICE raids are part of that, Marketplace's Mitchell Hartman reports.

[Mitchell Hartman]

Here's what the BLS's recent jobs reports have shown, says Sam Kuhn at recruiting firm Appcast.

[Jerome Powell]

Over the past two months, the labor force has declined by more than 750,000.

[Mitchell Hartman]

And roughly coinciding with that decline of.

[Jerome Powell]

382,000 over a three month average in the foreign born labor force.

[Mitchell Hartman]

That category includes both documented and undocumented workers. Economist Joe Bruceuelis at consulting firm RSM says Under the Trump administration, border crossings have plummeted, arrests and deportations have risen sharply.

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The crackdown on migrant labor has resulted in a decline in the labor supply.

[Mitchell Hartman]

Eventually, fewer people available to hire, combined with a lower unemployment rate could encourage workers to demand higher wages, which Brusuela says would alarm the Fed since it could drive up price inflation. For now, employers tell economist Ray Perryman in Texas that immigrant workers aren't showing up for work and fewer are available to hire. He says the problem's acute in agriculture and the food industry.

[Jerome Powell]

The shrimpers on the Gulf coast are also having a difficult time. Texas has had a lot of growth recently, and the construction projects obviously are having a hard time finding enough staff.

[Mitchell Hartman]

And in a state like Texas with a large immigrant population, Perryman says the impact of the crackdown will be outsized.

[Jerome Powell]

We've really come to rely on the workforce from Mexico to a very large extent. If you look at the undocumented segment of it 35 to 40% of our construction workforce, about 50% of our agricultural workforce and about 30% of our hospitality workforce.

[Mitchell Hartman]

And the impact will be different from state to state depending on how much of their labor force is foreign born, says Haley Brown at the center for Economic and Policy Research.

[Kai Ryssdal]

For instance, the share of the child care workforce that is foreign born is much, much higher in Alaska than it.

[Mitchell Hartman]

Is in North Dakota 40% versus about 10%. Sam Kuhn at APCast says high skilled sectors are especially vulnerable to a decline in legal immigration.

[Jerome Powell]

The broad sector professional and business services. Nearly one in four workers are foreign born, right? And that is a sector that's producing chips or they're producing software.

[Mitchell Hartman]

He says foreign competitors will be eager to snap up some of those workers. I'm Mitchell Hartman for Marketplace.

[David Brancaccio]

Listen to our half hour program with Kai Rysdal. Money, Careers, Innovation. A lot more later today on many public radio stations or streaming from Marketplace Online or a dot org in Los Angeles. I'm David Brancaccio with the MORNING REPORT from apm, American Public Media.

[Kai Ryssdal]

Marketplace. Listeners know that voice.

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I'm Kai Rysdal from Marketplace. Let's do the numbers.

[Kai Ryssdal]

This August marks 20 years of Kai Ryssdal as a trusted voice in economic news, from interviews with sitting presidents.

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Mr. President, good to talk to you again, sir.

[Jerome Powell]

Great to be here.

[Kai Ryssdal]

To conversations at local trampoline parks.

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The thing that makes the high concentration of trampoline parks here in Utah County a relevant economic indicator, though it's what it tells you about how demographics affect the economy.

[Kai Ryssdal]

Kai is always there to help you make sense of the economy. So to mark this milestone in his career, we're asking listeners to show their appreciation. Tell him how much his reporting means to you by sharing your thoughts in our e card. Visit marketplace.org thankyou by August 1st to share your appreciation.