Interest rates remain steady per Fed's decision; Trump calls for prompt decreases
The U.S. Federal Reserve has decided to keep its benchmark interest rate unchanged at a range of 4.25% to 4.50%, as reported on Wednesday[1][3]. This decision comes despite market expectations for a rate cut as early as September, as the central bank continues to grapple with inflation that remains above its 2% target and concerns over tariffs[4].
The Fed's cautious stance has been influenced by inflation, which is currently running at about 2.7% annualized in June[4]. Chair Jerome Powell and many Fed officials are wary of potential further tariff-induced inflation, leading them to prefer waiting for more data before easing policy[4].
However, internal division within the Fed has arisen, with two governors—Michelle Bowman and Christopher Waller—dissenting from the majority decision to hold rates steady[2]. They advocate for a 25 basis point rate cut, arguing that inflation, when excluding temporary tariff effects, has moved considerably closer to the target, and the labor market remains strong but near full employment[2].
This split among Fed Governors highlights uncertainty within the central bank about how quickly to pivot from the tightening cycle given mixed economic signals and external risks like tariffs[4]. The market's expectations of a September cut have risen sharply following a weak July jobs report, but the Fed leadership remains divided on an appropriate path forward[1].
President Donald Trump has intensified pressure on the Fed to adopt a more expansionary policy, urging for immediate interest rate cuts[5][6]. He has argued that inflation is no longer a threat and that rate cuts are overdue[5][6]. Trump also cited stronger-than-expected GDP data for the second quarter, reportedly around 3% growth[7].
However, Trump's comments have been sharply criticized, with the President calling the central bank's stance harmful to everyday Americans[8]. As the U.S. heads into the final stretch before the 2026 midterm elections, Trump's comments have added a political dimension to the Fed's decision-making process[9].
Economic growth slowed during the first half of 2025, according to news reports[10]. Despite this, the labor market remains strong, with the unemployment rate remaining low[11]. Inflation remains moderately elevated, according to the Fed[11].
References:
- Fed holds rates steady as Trump urges rate cut
- Fed's Waller, Bowman dissent as policymakers keep rates unchanged
- Fed keeps rates steady, cites high uncertainty
- Fed faces pressure to cut rates as Trump intensifies attacks
- Trump reiterates demand for immediate interest rate cuts
- Trump urges Americans to buy homes and pay them off
- Stronger-than-expected GDP data cited by Trump
- Trump sharply criticizes Fed's decision
- Fed's stance harmful to everyday Americans, claims Trump
- Economic growth slowed during the first half of 2025
- Labor market remains strong and unemployment rate remains low
The Fed's decision to keep interest rates unchanged is influenced by ongoing concerns about inflation and potential tariff impacts, but internal dissent exists, with Governors Michelle Bowman and Christopher Waller advocating for a rate cut due to close proximity to the target and a strong labor market. The ongoing debate about monetary policy has taken on a political dimension, with President Trump urging the Fed to adopt a more expansionary policy.
