Topline
The Federal Reserve on Wednesday opted to keep interest rates at their current level despite pressure from President Donald Trump, as two members of the agency’s policymaking panel cast the first pair of dissenting votes since the 1990s.
The Federal Open Market Committee voted 9-2 in favor of holding interest rates between 4.25% and 4.5%, a range maintained by the Fed since December 2024, with Fed Governor Adriana Kugler absent from the vote.
The FOMC reiterated a goal for inflation to settle at 2% and said in a statement “uncertainty about the economic outlook remains elevated.”
Fed governors Michelle Bowman and Christopher Waller, who have signaled support for easing interest rates in recent weeks, voted against holding interest rates at their current level, marking the first double dissent by Fed board members since 1993.
Morgan Stanley in a note last week suggested Fed Chair Jerome Powell would “emphasize patience” in a decision to not lower interest rates and point to “considerable uncertainty” that Trump’s tariffs will disrupt the economic outlook.
Bank of America indicated in a note that Powell would be in “no hurry” to cut rates in June, though disagreements among Fed staff “may start a trend of more frequent dissents” and a “more divided Fed may raise risks of a less consensus and more contentious institution.”
Bowman said last week that “should inflation pressures remain contained,” she would “support lowering the policy rate” as soon as the Fed’s meeting this month, while Waller suggested, “With inflation near target and the upside risks to inflation limited, we should not wait until the labor market deteriorates.”
Most economists believe the Fed will hold off on cutting interest rates in order for the agency to maneuver if economic conditions worsen, according to FactSet. Some believe the Fed will lower rates during its September meeting, with about 66% odds of a rate easement and a quarter-point reduction, according to CME’s FedWatch tool.
Trump has repeatedly criticized Powell throughout his second term and has reportedly discussed naming his successor because of Powell’s refusal to lower interest rates. Last week, following Trump’s combative on-camera visit to the Federal Reserve, Trump said he met with Powell and had a “very good meeting on interest rates.” Trump said the Fed chair told him the “country is doing well,” which Trump meant to believe Powell would “start recommending lower rates.” During the meeting, Trump—who has called for interest rates to be cut to as low as 1%—expressed confidence Powell “is going to do the right thing,” though “it may be a little too late.”
Earlier this month, Powell said he wouldn’t rule out an interest rate cut as soon as July, noting, “I wouldn’t take any meeting off the table or put any on the table.” During the FOMC’s meeting in June, “most” Fed staff indicated they believed the central bank would lower interest rates in 2025, and the central bank in March forecast two quarter-point rate cuts through the rest of the year.
Despite reportedly considering Powell’s replacement behind closed doors, Trump has said he would not fire the Fed chair, whose term expires in May 2026. Treasury Secretary Scott Bessent told Bloomberg earlier this month a “formal process” was launched to find Powell’s successor and called for Powell to step down as Fed governor once his term expires, ahead of his term as governor ending in January 2028. Trump—who appointed Powell to the role in 2017—suggested in June there were “three or four” candidates under consideration for Powell’s seat. Among possible successors are National Economic Council Director Kevin Hassett, former Fed Governor Kevin Warsh, ex-World Bank president David Malpass and Bessent. If Trump sacked Powell, the move would challenge a 1935 Supreme Court ruling that found the president cannot fire the leaders of independent federal agencies over policy agreements. He has challenged this ruling previously in his second term, however, after he removed Democratic commissioners of the Federal Trade Commission and members of the National Labor Relations Board earlier this year.