WASHINGTON, July 30, 2025 (BSS/AFP) - The US central bank is expected to defy political pressure and keep interest rates unchanged Wednesday at the end of a two-day policy meeting, as the effects of President Donald Trump's tariffs emerge.

The Federal Reserve's decision, due to be announced at 2:00 pm US eastern time (1800 GMT), comes amid a flurry of data releases this week, including an early estimate of second quarter economic growth.

"It's a high-wire act for the Fed, because they're balancing a lot of risks without a net," KPMG chief economist Diane Swonk told AFP.

"Some of the most tariff-sensitive sectors have begun to show price increases, but the bulk of any inflation bump due to tariffs is still ahead of us," Swonk added in a recent note.

Meanwhile, there are cracks in the foundation when it comes to the labor market, she said, adding that "it doesn't take much of a pick-up in layoffs to have a bigger effect on demand."

Analysts broadly expect the Fed to hold interest rates steady at a range between 4.25 percent and 4.50 percent. Its last reduction was in December.

Trump has repeatedly criticized Fed Chair Jerome Powell for not lowering interest rates earlier, accusing him of acting too late and questioning his competence.

JP Morgan chief US economist Michael Feroli said in a note that Powell will likely sidestep questions at a press conference Wednesday on issues like Trump's threats to fire him or speculation over a possible early retirement.

Powell's term as Fed Chair ends in May 2026.

- 'Hyper-politicized' -
But the central bank could well see renewed criticism from Trump after unveiling its decision, particularly as the outcome may show internal disagreements.

Economists anticipate potentially two dissents among Fed policymakers, given that a couple of officials have signaled willingness to reduce rates as soon as in July.

This month, Fed governor Christopher Waller flagged that indicators do not point to a particularly healthy private sector jobs market.

While he did not commit to a decision, he has made the case for a July rate cut and stressed that policymakers need to respond to real-time data.

Analysts said it is not too unusual to see a couple of dissents when the Fed unveils its decision, and financial markets would already have braced for this possibility given officials' recent remarks.

But Swonk warned: "What I worry about is how, in this hyper-politicized environment, that's perceived."

"Multiple dissents by governors, who are closest to the Chair, could signal an unintended view that they have lost confidence in the chairman," Swonk noted.

Already, Trump has called for interest rates to be dropped by as much as three percentage points.

- Cruel summer -
Swonk of KPMG said: "it's going to get tougher over the summer."

"Tariff-induced price pressures are starting to filter through the economy," said EY chief economist Gregory Daco in a note.

Companies are citing weaker earnings and higher input costs, while elevated consumer prices are beginning to weigh on retail sales.

"More demand erosion is likely in the months ahead," Daco said.

He expects Powell to "strike a tone of cautious patience" in his press conference after the rate decision.

Powell would likely reiterate that policy remains data-dependent, and that the Fed can adjust this as conditions evolve, Daco added.

Looking ahead, Swonk said, "the real issue will be, what does he say at Jackson Hole now?"

Powell typically addresses an annual central banking conference in Jackson Hole, Wyoming, and it takes place this year in late August.

"The next shoe to drop is: Will there be enough data by the time we get to Jackson Hole to open the door to a September rate cut?" Swonk said.