The central bank has faced huge pressure from the president to cut rates in recent weeks
The Federal Reserve left interest rates unchanged Wednesday, announcing no reduction in its funds rate and once again defying pressure from the Trump administration to cut.
The central bank said after its July meeting that it was holding that rate steady at its current range of 4.25% to 4.5%, the fifth time in a row it’s kept rates where they are as it continues to assess how the national economy is reacting to a sea change in US trade policy.
Two governors dissented in the release: Michelle W. Bowman and Christopher J. Waller. They both wanted a 25-basis-point cut. Nine others voted for the rate hold, including chair Jerome Powell, while one governor was absent and did not vote.
The decision arrived amid a storm of intrigue after President Trump, who’s frequently criticized the Fed in recent months, exchanged sharp views on camera with Powell at the central bank’s headquarters last week and again said rates should be lower.
Financial markets had viewed virtually no chance of the Fed bringing rates down at this month’s meeting, which arrived after inflation jumped to 2.7% in June and the labor market tacked on 147,000 jobs – almost 40,000 more than consensus estimates had expected.
But plenty of attention will now focus on public utterances from Fed officials in the days and weeks ahead, particularly after recent weeks revealed some of its Open Market Committee (FOMC) would support a July cut.
Bowman and Waller suggested in June that they could back a rate reduction soon if inflation measures stayed in check.
And while he’s dismissed claims that he came close to attempting to fire Powell, Trump has ramped up criticism of the Fed chair and repeatedly derided him as “Too Late” on interest rate cuts.
Last month, Trump sent Powell a handwritten note urging him to bring rates lower and highlighting a more aggressive cutting policy at other global central banks.
Powell, who was nominated by Trump during his first presidency, is due to step aside as Fed chair when his term ends next May, and the president has indicated that he’s close to naming a nominee to succeed him.
For now, mortgage and housing market watchers will be keeping a close eye on Treasury yields to see how the bond market reacts to the Fed’s latest decision – and on Powell’s press conference later this afternoon, which could give some indication of when the Fed is likely to begin cutting again.
The Fed trimmed rates three times in the second half of 2024, bringing its funds rate lower by a full percentage point in its first cuts since the COVID-19 pandemic.
CME FedWatch viewed the chance of a July rate cut as minuscule – but sees a 62.4% chance the Fed will lower rates by 25 basis points when it meets next, on September 16-17.
Stay updated with the freshest mortgage news. Get exclusive interviews, breaking news, and industry events in your inbox, and always be the first to know by subscribing to our FREE daily newsletter.
