Fed Holds Rates Steady Despite Trump’s Pressure, Offers No Clarity on September Cut

Fed Holds Rates Steady Amid Political and Economic Crosswinds

WASHINGTON, D.C. — The Federal Reserve opted on Wednesday to maintain its key policy rate at 4.25%–4.5%, marking the fifth consecutive meeting without change. Despite President Donald Trump’s fierce public campaign for cutting borrowing costs—and dissents from two Trump‑appointed governors—the Fed’s leaders stayed the course, emphasizing caution amid elevated uncertainty.

A Divided Fed Breaks With Trump’s Demands

In a 9–2 vote, the Federal Open Market Committee (FOMC) left the federal funds rate unchanged. Governors Michelle Bowman and Christopher Waller broke ranks, preferring an immediate rate reduction—a first dual dissent since 1993. Both argued that the economy’s cooling job market and contained inflation justify a cut. Waller noted recent tariff‑driven price spikes are likely a one‑off and expect consumer prices to settle back next year.

But Chair Jerome Powell and the majority remained unconvinced, wary of reversing course too soon. In their post‑meeting statement, they removed June’s upbeat language about diminishing uncertainty, instead acknowledging that “uncertainty about the economic outlook remains elevated.” They also downgraded growth from “solid” to “moderated” in the year’s first half.

Inflation, Tariffs, and the Path Forward

Inflation has eased from 2022’s peaks—currently near 2.1% on the Fed’s preferred measure—but recent tariff increases threaten to reverse gains. Fed officials signaled in June they expect two quarter‑point cuts by year‑end, and markets continue to price in a September move. Yet the statement refrained from any explicit forward guidance, citing the need to assess tariff effects fully.

“A solid economy means higher rates to prevent overheating,” said Gennadiy Goldberg, head of U.S. rates strategy at TD Securities. “If markets think the Fed is easing solely to appease fiscal pressures, long‑term yields could rise—and so would borrowing costs across Main Street.”

Trump’s Unrelenting Criticism

President Trump greeted the hold with scathing remarks, calling Powell “a moron” and blaming the Fed for driving up U.S. debt interest. He reiterated his “no inflation” stance and pressed for immediate rate reductions, despite legal constraints preventing firing the Fed chair for policy disagreements.

Late Tuesday, Trump toured the Fed’s $2.5 billion headquarters renovation—another front in his campaign to undermine central bank independence. Even as he praised Treasury Secretary Scott Bessent’s trade talks in China, Trump kept up pressure on monetary policy.

Economic Data Clouds Outlook

Fresh data added complexity to the Fed’s calculus:

• Second‑quarter GDP grew at a 3% annualized rate, stronger than expected—propelled partly by an import pullback ahead of tariffs.

• Core inflation slowed to 2.5%, near the Fed’s 2% target.

• Unemployment remains low, but job openings and hiring have softened.

“We expect the Fed will catch up to the data soon,” said Kevin Hassett, director of the National Economic Council, expressing White House optimism despite the hold.

What’s Next: Jackson Hole and Beyond

With no guidance on timing, all eyes now turn to the Fed’s Jackson Hole symposium in late August, where Powell traditionally delivers a marquee policy speech. Investors will watch for clues on whether the Fed truly leans toward easing as inflation risks from tariffs and geopolitical shocks loom.

For now, Wednesday’s decision underscores the Fed’s commitment to its dual mandate—stable prices and maximum employment—even in the face of unprecedented political attacks. As dissenting governors signal potential change and economic indicators evolve, the Federal Reserve stands at a crossroads between data‑driven caution and market expectations for rate relief.

— Reported by Orbital News
Sources: Federal Reserve statement; FOMC vote records; Commerce Department GDP report; interviews with market strategists.