In a move that deepened the rift between the White House and the central bank, the Federal Reserve on Wednesday held interest rates steady, rejecting mounting pressure from President Donald Trump for aggressive cuts. In a 9-2 vote, the Federal Open Market Committee (FOMC) opted to keep the federal funds rate at a range of 4.25% to 4.5%, despite open dissent from two Federal Reserve Governors and renewed economic uncertainty.
This decision marked the first time since 1993 that multiple Fed governors — Michelle Bowman and Christopher Waller — cast formal dissenting votes in favor of easing. Both have argued that with inflation cooling and labor markets showing early signs of weakening, a cut was not only justified but overdue.
But Fed Chair Jerome Powell remained cautious, warning at a post-meeting news conference that “no decisions” had been made about the next meeting in September. “We don’t do that in advance,” Powell stated firmly. “We’ll be taking that information into consideration and all the other information we get as we make our decision.”
The Fed’s post-meeting statement hinted at a more somber view of the economy than it expressed in June, acknowledging that “growth of economic activity moderated in the first half of the year.” While unemployment remains low and inflation is down from its peak, uncertainty remains “elevated.”
The decision sent ripple effects through financial markets. While many traders had anticipated a pause, hopes for a September cut began to dim as Powell refrained from offering any dovish commitments. Stocks, which had been climbing earlier in the day, surrendered gains during Powell’s remarks.
President Trump, who has become increasingly vocal about his displeasure with Powell and the Fed, had demanded rate cuts totaling 3 percentage points — a move he claimed would slash borrowing costs and revive the faltering housing market. His criticism has ranged from public ridicule — calling Powell “Too Late” — to previously floating the idea of firing the Fed Chair, a move widely believed to be legally dubious.
Adding fuel to the fire, Trump’s allies in the administration have slammed the Fed for cost overruns on a multi-million dollar renovation of its D.C. buildings, suggesting mismanagement. Powell has pushed back, attributing rising costs to inflation and supply chain disruptions, not negligence.
Still, some economic indicators may bolster Trump’s position. The Commerce Department reported that GDP grew at a 3% annualized pace in the second quarter, exceeding expectations. Inflation dropped to 2.1% over the same period — close to the Fed’s 2% target — according to the central bank’s preferred forecasting model. Core inflation landed at 2.5%, down significantly from the previous quarter.
Despite these numbers, Powell remains wary of overcorrecting. “We are watching the labor market closely,” he said, acknowledging that while strong for now, it could shift unexpectedly.
Jack McIntyre, portfolio manager at Brandywine Global, said the dissent from Bowman and Waller may have a longer-term impact, even if they were outvoted. “It was the most well-telegraphed dissension ever,” he said. “Their real effect was to nudge Powell a little closer to the dovish camp.”
Markets are still betting on a September rate cut — but much depends on the July and August job reports.
In the meantime, the Fed will convene in late August at its annual Jackson Hole summit, a traditional venue for major policy pronouncements. All eyes will be on Powell’s speech there, especially as the White House continues to ramp up its economic messaging ahead of the 2026 midterms.
National Economic Council Director Kevin Hassett, appearing on CNBC shortly after the Fed’s announcement, tried to strike a conciliatory note: “We at the White House 100% respect their independence, but we also like to respect their analysis. We expect the Fed will catch up to the data soon.”
The message from Powell and the FOMC on Wednesday was clear: they’re watching, waiting, and not yet ready to cut — no matter how loudly the president demands it.