Divided Fed holds key interest rate steady, defying Trump's demands for aggressive cuts
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Divided Fed holds key interest rate steady, defying Trump's demands for aggressive cuts

July 30, 2025
08:08 PM
5 min read
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economystocks

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A divided Federal Reserve on Wednesday voted to keep its benchmark interest rate steady, with two top officials dissenting.

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July 30, 2025

08:08 PM

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watch now1:3201:32Fed leaves funds rate unchangedPower LunchWASHINGTON – A divided Federal Reserve on Wednesday voted to keep its benchmark interest rate steady, despite a barrage of criticism from President Donald Trump and dissents from two top officials.The Federal Open Market Committee, the group that sets the overnight borrowing rate, voted 9-2 to stay on hold

The federal funds rate will continue to be set in a range between 4.25%-4.5%

The level sets what banks charge each other for overnight lending, but influences a slew of other rates across the economy.However, the decision met opposition from Governors Michelle Bowman and Christopher Waller, both of whom have advocated for the Fed to start easing in acknowledgement that inflation is under control and the labor market could start weakening soon

This was the first time since late 1993 that multiple governors cast no votes on a rate decision.The post-meeting statement offered only a couple changes in how the committee views economic conditions."Although swings in net exports continue to affect the data, recent indicators suggest that growth of economic activity moderated in the first half of the year," the document stated. "The unemployment rate remains low, and labor market conditions remain solid

Inflation remains somewhat elevated."At the June meeting, the committee had a more optimistic view, saying the economy "continued to expand at a solid pace."The Wednesday statement said uncertainty conditions "remains elevated," also a less upbeat assessment from June, which noted that uncertainty had "diminished but remains elevated."A slower economy would boost the argument for lower interest rates, though the committee stopped short of endorsing that view.'No decisions September' had overwhelmingly expected no action on rates, but stocks headed lower after Fed Chair Jerome Powell said at a news conference that the committee hadn't yet determined whether it would cut rates at its September meeting. "We have made no decisions September," he said. "We don't do that in advance

We'll be taking that information into consideration and all the other information we get as we make our decision."He further explained that the central bank is watching the potential impact of tariffs on inflation."Our obligation is to keep longer term inflation expectations well anchored and to prevent a one time increase in the price level from becoming an inflation blem," he said.Traders had been expecting the Fed to cut in September, but after Powell's s, the lihood of a quarter percentage point reduction slipped to 46% from 64%, according to the CME FedWatch tool

In June, Fed officials narrowly indicated they see two cuts in total this year

The committee normally has 12 voters but was without Governor Adriana Kugler at the July meeting."It is an exceedingly rare occurrence when two Fed governors dissent at an FOMC meeting, but it was the most well telegraphed dissention ever at today's FOMC meeting," said Jack McIntyre, portfolio manager at Brandywine Global. "The driver of the dissension was the timing of rate cuts, not the direction of policy adjustments

The real impact of the dissenters was to pull Powell toward the dovish camp for September."McIntyre said he expects the Fed will cut in September, barring any major surprises in the July and August employment reports.The news s a remarkable stretch for an entity with great sway over the economy but one that has mostly avoided the political fray, at least overtly.Trump's push for rate cutsTrump has called for Powell's resignation and even toyed with the legally questionable idea of firing him

Though he's largely backed off the threat of sacking Powell, the president has kept up the criticism of a former appointee whom he now regularly calls "Too Late."The president has suggested the Fed lower its benchmark rate by 3 percentage points, which he said would reduce bowering costs on the surging national debt and help the moribund housing market.In addition to the hectoring over rates, the Trump administration has ripped Powell and the central bank for cost overruns on a massive remodeling ject at two of the Fed's buildings in Washington

Powell has insisted that the overruns are not the duct of mismanagement but rather escalating costs since the ject began.Wednesday brought more news that could influence the Fed's path, Trump's badgering notwithstanding.The Commerce Department reported that gross domestic duct grew at a 3% annualized rate in the second quarter, considerably stronger than expected

Though much of the headline gain was pelled by a reversion of a massive import surge in the first quarter ahead of Trump's tariffs, the report nevertheless reinforced the notion of an economy still on solid ground.Moreover, the report showed inflation running at just a 2.1% rate for the period, according to the Fed's main forecasting tool

Core inflation was a bit higher at 2.5%, but both numbers plunged from their first-quarter levels and neared the Fed's 2% bogey."We at the White House 100% respect their independence, but we also to respect their analysis," National Economic Council Director Kevin Hassett said Wednesday on CNBC. "We expect that the Fed will catch up to the data soon

That's going to be a really big, positive story."The Fed next will gather at its annual retreat in Jackson Hole, Wyoming, in late August

The event historically has a major policy speech from the chair.Don’t miss these insights from CNBC Bank of America says these five stocks have more room to run ahead of earningsThese overbought stocks could take a dip after the market's record gainsGoldman Sachs is getting worried the economyWhat the prediction are saying the big Wall Street events ahead