MNI: FOMC Holds Rates; Two Governors Prefer 25BP Cut
Jul-30 18:00By: Pedro Nicolaci da Costa
US+ 1
The Federal Reserve kept interest rates steady Wednesday for a fifth straight meeting but two governors dissented in favor of lowering rates by a quarter point, against a backdrop of relentless pressure from the White House for the central bank to reduce borrowing costs.
It was the first time two governors dissented at the same meeting since 1993. Governors Miki Bowman and Chris Waller have been touted as possible -- but not favored -- candidates to replace Fed Chair Jerome Powell when his term as chair ends in May 2026.
"Recent indicators suggest that growth of economic activity moderated in the first half of the year," the Fed said in its policy statement, after leaving the benchmark fed funds rate unchanged in a range of 4.25-4.5%. The FOMC had previously said the economy was continuing to expand at a solid pace.
Fed officials have been in wait-and-see mode in recent months as they brace for the impact of significant new U.S tariffs to hit inflation and economic growth.
In June, officials penciled in a median of two interest rate cuts for this year, and markets expect such reductions to start in September.
The Fed cut rates by a full percentage point late last year but then went into a holding pattern after President Donald Trump was elected, because of the uncertain economic impact of his policy proposals on trade, taxes and immigration.
The Fed said uncertainty remains elevated but it is generally seen as having been reduced in recent months, potentially bringing officials them closer to making a decision on rates around the fall.
Trump has accused the Fed of playing politics and unduly stifling economic growth, and repeatedly threatened to fire Powell. He has also directly linked calls for lower rates to the need for lower debt financing costs for the government, which many economists say brings the United States closer to a world of fiscal dominance.
The president has accused Powell of mismanaging cost overruns at the Fed headquarters renovation project, and toured the central bank last week in an unusual, high profile visit.
