A split Fed leaves rates unchanged despite renewed pressure from Trump

As expected, the Federal Reserve Board of Governors voted to leave rates unchanged today. The vote revealed a fissure among the board, with two governors voting to cut rates.
It is the first time the Fed board did not vote unanimously since 1993, CNBC reported. Governors Christopher Waller and Michelle Bowman dissented, advocating for a 25-basis-point rate cut.
The vote leaves the Fed’s benchmark interest rate steady at 4.25%–4.5%, maintaining the current level for the fifth straight meeting. #FireJeromePowell quickly began trending on X.
“The economy is not performing as if a restrictive policy is holding it back,” Powell said at a press conference today. The impact of tariffs is still to be seen, he added.
“We are learning more and more,” Powell said. “It doesn’t feel like we’re very close to the end of that process. And that’s not for us to decide, but it feels like there’s much more to come.“
Powell complimented the dissenting governors, adding that “people thought carefully about this.” He added several times that “the majority of the committee was of the view that inflation is a bit above target.”
Inflation is “most of the way back to 2%,” Powell added later. “If you go back to the last couple of years, it was all about services inflation, which was being very sticky. Now, services inflation is coming down nicely. Goods inflation was well behaved before, and now goods inflation is going up. So the story has really changed. That’s partially because of the tariffs. It’s also partially because we have restricted policy in place.”
Asked about pressure from Trump and the White House, Powell gave a long explanation of the Fed’s independence, never mentioning the president by name.
“Having an independent central bank has been an institutional arrangement that has served the public well, and as long as it serves the public well, it should continue and be respected,” he said. “What it gives you is the ability to make these very challenging decisions in ways that are focused on the data and the evolving outlook, the balance of risks and all the things we talk about, and not political factors.”
‘We should not wait’
In a speech earlier this month, Waller sounded the alarm about the economy.
“Private-sector payroll growth is near stall speed,” Waller said. “We should not wait until the labor market deteriorates before we cut the policy rate.”
A couple of recent data points drove the Fed’s decision to proceed cautiously.
Inflation is running at approximately 2.7% in June, exceeding the Fed’s 2% target, with ongoing concerns about tariff-driven price increases on imported goods.
Otherwise, GDP grew at 3% annualized in the second quarter, stronger than expected, though some analysts caution this reflects volatile trade patterns rather than sustainable domestic demand.
The markets project a two-thirds chance of a rate cut when the Fed meets next in September, CNBC reported. The Fed will get “two full rounds of employment and inflation data” before the September meeting, Powell noted.
Stephanie Link, chief investment strategist, head of investment solutions, and a portfolio manager at Hightower Advisor, said Powell’s comments at the press conference indicated no desire to back a rate cut in September.
The Fed has kept its key interest rate steady since late 2024, despite months-long pressure from President Donald Trump to make cuts. Trump has floated the idea of firing Fed Chair Jerome Powell, although the president on July 24 backed off his threats following a visit to the Fed’s headquarters.
Trump’s ire stems from the central bank’s decision to wait and see how tariffs impact prices before adjusting rates. After the Fed’s June meeting, Powell told reporters that as long as the economy retains a solid labor market, decent growth and softening inflation, “we feel like the right thing to do is to be where we are, where our policy stance is, and just learn more.”
Still, Trump renewed his demands after the release of the Wednesday GDP report that showed the U.S. economy grew 3% in the second quarter. In a post on Truth Social, he said Powell “MUST NOW” lower the rate.
Wire reports contributed to this report
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