Topline
The Federal Reserve on Wednesday voted to lower interest rates—following months of pressure and criticism from President Donald Trump—as the central bank signaled additional cuts later this year.
The Federal Open Market Committee voted 11-11 in favor of lowering interest rates by a quarter-point to between 4% and 4.25%, down from the 4.25% to 4.5% range where they have been held since December.
Fed Governor Stephen Miran, whom Trump appointed to the role to fill Adriana Kugler’s vacant seat, was the lone dissenting vote.
The FOMC said two additional rate cuts are expected by the end of the year, as concerns are raised over the weakening labor market.
Investors are favoring two more quarter-point cuts in October and December, potentially lowering the funds rate to between 3.5% and 3.75% by the end of the year, according to CME’s FedWatch.
David Mericle, an economist for Goldman Sachs, wrote in a note the “key question” for the Fed’s meeting is whether policymakers said whether “this is likely the first in a series of consecutive cuts” as the central bank was expected to “acknowledge the softening in the labor market,” though they may not “nod to an October cut.”
Trump has repeatedly accused Powell of being “TOO LATE” to lower interest rates, writing on Truth Social Monday, “[Powell] MUST CUT INTEREST RATES, NOW, AND BIGGER THAN HE HAD IN MIND.”
The Fed has planned for up to two 25-basis-point interest rate cuts by the end of the year. The Fed’s Federal Open Market Committee’s July meeting indicated “almost all” policymakers thought it was “appropriate” to keep rates between their current range, as Powell indicated the Fed would continue monitoring incoming data on jobs and inflation. The Fed adheres to a dual mandate of full employment and stabilized prices—inflation has remained above the central bank’s goal of 2%, worsening as expected to 2.9% in August, while unemployment ticked up to 4.3% with far fewer jobs added than projected.
Fed Governor Lisa Cook remained on the central bank’s policymaking panel this week, after an appeals court dismissed Trump’s bid to sack her. Trump previously called for Cook’s resignation after Federal Housing Finance Agency Director Bill Pulte accused her of mortgage fraud, after she allegedly designated two properties as her primary residence. Cook has denied the claims, telling Forbes in a statement she had “no intention of being bullied to step down from my position because of some questions raised in a tweet.” The White House has stated that it will appeal the ruling.