In a contentious decision reflecting both internal division and external political pressure, the Federal Reserve voted 9-2 to leave its benchmark interest rate unchanged, keeping the federal funds rate in the 4.25%-4.5% range. The July 30 action comes despite growing calls from President Donald Trump and two dissenting governors, marking the first time since 1993 that multiple Fed governors have opposed a rate decision.

Governors Michelle Bowman and Christopher Waller dissented, arguing that inflation is sufficiently under control and signs of labor market softening warrant immediate easing. Their push signals growing discomfort with the Fed's cautious stance, particularly in light of recent data.

Powell's Wait-and-See Approach

At a post-meeting press conference, Fed Chair Jerome Powell said no decision had been made regarding a rate cut in September, emphasizing that future action will depend on evolving economic data.

"We have made no decisions about September," Powell stated. "We'll be taking into account all incoming information."

He also noted concerns over how new tariffs might influence inflation, reinforcing the Fed's long-term inflation target of 2%.

The post-meeting statement reflected more tempered economic optimism than in June, noting that "growth of economic activity moderated" in the first half of 2025, while unemployment remains low and inflation "somewhat elevated."

Trump's Public Campaign

President Trump has been vocally pressuring the Fed to slash rates by as much as 3 percentage points, arguing such a move would ease debt servicing costs and revive housing markets. He has called Powell "Too Late," and earlier floated the idea of removing him - a move widely seen as legally dubious.

Adding fuel to the fire, the Trump administration has also criticized the Fed over cost overruns tied to building renovations in Washington, D.C. Powell has attributed the overspending to inflation-driven price hikes, not mismanagement.

Market Reactions and Economic Context

Following Powell's remarks, market expectations for a September rate cut fell to 46%, down from 64%, according to CME's FedWatch tool. June projections from Fed officials had tentatively suggested two rate cuts by year-end, though clarity on timing remains elusive.

Economically, the Fed faces a complex backdrop. Q2 GDP growth came in at 3%, boosted largely by a correction in imports following a surge before new tariffs. Meanwhile, core inflation fell to 2.5%, nearing the Fed's target.

"We at the White House 100% respect their independence," said NEC Director Kevin Hassett, "but we expect the Fed will catch up to the data soon. That's going to be a really big, positive story."

What's Next?

The next key milestone for Fed policy watchers is the Jackson Hole Symposium in late August, often used to preview future monetary shifts. With the economy still expanding and inflation trending downward, the September FOMC meeting could become a decisive moment in U.S. monetary policy.

Portfolio managers like Jack McIntyre of Brandywine Global believe a September cut is still likely, absent any sharp changes in July or August employment data. "The dissents weren't about direction, just timing," he said. "They bring Powell closer to the dovish camp."