- The Fed held rates steady at 4.25%-4.5%, with two governors dissenting in favor of cuts—marking the first multiple-governor dissent since 1993.
- Trump’s pressure on the Fed continues, including criticism over interest rates and cost overruns, though Powell maintains decisions are data-driven.
- Strong GDP growth and cooling inflation suggest a possible rate cut in September, with the next key signal expected at the Jackson Hole retreat in August.
In a decision marked by internal disagreement and mounting political pressure, the Federal Reserve voted on Wednesday to maintain its benchmark interest rate in the 4.25% to 4.5% range. The 9-2 vote by the Federal Open Market Committee (FOMC) came despite President Donald Trump’s vocal push for dramatic rate cuts and dissent from two Fed governors, Michelle Bowman and Christopher Waller, who supported easing monetary policy.
This is the first time since 1993 that multiple Fed governors have publicly dissented from a rate decision. Both Bowman and Waller argued that inflation is largely under control and that potential weakness in the labor market warrants an earlier move to cut. However, the Fed’s statement reflected caution, noting moderated economic growth, a solid labor market, and inflation that remains “somewhat elevated.”
Market Reaction and Powell’s Upcoming Remarks
The Fed’s decision was in line with market expectations, and U.S. stock markets held steady after the announcement. Investors are now focused on Fed Chair Jerome Powell’s post-meeting press conference, where he may clarify whether the central bank is leaning toward a rate cut at the next meeting in September.
According to the statement, economic uncertainty remains “elevated,” a softening from June’s more optimistic language. The tone suggests that while the Fed is aware of slowing momentum, it is not yet ready to act, especially with second-quarter GDP growth coming in at a strong 3% annualized rate, and inflation dipping closer to the Fed’s 2% target.
Trump’s Pressure Campaign Continues
President Trump has continued to berate Powell, a Fed chair he originally appointed, for not slashing rates aggressively. Trump has called for cuts of up to 3 percentage points, claiming that doing so would alleviate pressure from national debt payments and rejuvenate the housing market. He’s also targeted Powell for budget overruns tied to a major renovation of Fed buildings in Washington.
While the president has floated the idea of firing Powell, legal constraints make that unlikely. Instead, Trump is expected to keep using public pressure to influence monetary policy, though Powell has consistently asserted that Fed decisions are guided by data, not politics.
Economic Outlook and What’s Next
The Fed’s next significant event is its annual Jackson Hole retreat in late August, which often serves as a stage for major policy signals. Looking ahead, the September FOMC meeting is widely seen as a probable point for a rate cut, especially if inflation continues to moderate and economic growth slows.
In the meantime, Fed watchers will scrutinize Powell’s press conference for any hints of a shift in stance. If core inflation continues to fall, as it did in the second quarter to 2.5%, the case for easing policy could strengthen, even as the central bank maintains a cautious posture.