Fed leaves interest rates unchanged amid Trump pressure, dissents
Add Axios as your preferred source to
see more of our stories on Google.
The Federal Reserve building under renovation. Photo: Alex Wroblewski/Bloomberg via Getty Images
The Federal Reserve left its target interest rate unchanged Wednesday, brushing off pressure from President Trump to cut rates. Two members of its Board of Governors dissented, the biggest divide on the board in decades.
Why it matters: The Fed is resisting presidential pressure to cut borrowing costs, as most of its leaders see the chance of a tariff-fueled inflation surge as a major risk ahead.
- The presidential attacks are sure to continue, as Trump and his allies pressure chair Jerome Powell to resign and seek Fed leadership that will lower interest rates, even in the face of elevated inflation and solid growth.
Driving the news: The policy-setting Federal Open Market Committee left its federal funds rate target range at 4.25% to 4.5%, where it has been since December.
- Governor Christopher Waller and vice-chair for supervision Michelle Bowman, both Trump appointees, dissented. They preferred to cut interest rates by a quarter percentage point.
- It was the first time two governors dissented in more than 30 years.
State of play: Powell said the Fed will continue to evaluate the economic effects of tariffs.
- Powell said at a press conference that "higher tariffs have begun to show more clearly to prices of some goods, but their overall effects on economic activity and inflation remain to be seen."
- Despite a spate of trade deals, "we're still a way from seeing where things settle down" on tariffs, Powell said.
State of play: Trump and his appointees have repeatedly assailed Powell and the Fed for not cutting rates, saying that the move would boost an already-strong economy, save the federal government money on debt service, and put U.S. rates more in line with other rich countries.
- They have broadened the attacks in recent weeks to claim Powell has mismanaged a $2.5 billion renovation of the central bank's headquarters complex and that current rate policy is causing the Fed to incur billions in losses as it makes interest payments to banks.
- The attacks prompted a rare visit from the President to the Fed's construction site last week.
- Powell on Wednesday described the visit as "nice" and said it was an honor to host Trump.
What to watch: At the press conference, Powell said that the economy is still holding up, cutting against the case for an imminent rate reduction.
- "The economy is not performing as a restrictive policy is holding it back inappropriately," Powell said when asked about a potential rate cut in September.
- But he added that the "downside risks to the labor market are certainly apparent."
Flashback: Waller laid out his case for cutting interest rates at this meeting in a speech two weeks ago, arguing that tariff-related price increases would be temporary and labor market risks have increased.
This is breaking news and will be updated.
