Fed Holds Rates Steady Despite Mounting Trump Pressure
The Federal Reserve holds interest rates at current levels despite political tension and dissent within its ranks.
The Federal Open Market Committee voted 9–2 to keep the federal funds rate in a 4.25%–4.50% range, pushing back against rising public pressure from President Trump for quick, deep cuts. Two Trump-appointed governors—Michelle Bowman and Christopher Waller—broke from the majority, marking the first time since 1993 that more than one governor dissented on a rate decision.
The move underscores a sharp divide within the central bank over the timing of future rate cuts and highlights its commitment to data-driven decision-making rather than political demands. For the fifth straight meeting, the Fed held its benchmark rate steady despite calls from the White House to act now.
Political Pressure Meets Rate Rigidity
President Trump made no secret of his views ahead of the announcement, calling for rate cuts to “supercharge the economy” and offset the effects of newly imposed tariffs. Even with that pressure, the Fed showed no signs of flinching.
Federal Reserve Chair Jerome Powell emphasized the independence of the central bank, saying: “We have made no decisions about September, we don’t…do that in advance.” That line, delivered at the post-meeting press conference, reaffirmed that policy will be guided by incoming data rather than politics.
Powell also pointed to uncertainty about how tariffs will affect the economy, arguing that it is simply too early to draw firm conclusions. While he acknowledged the White House’s stance, he made it clear that political considerations will not dictate monetary policy.
Market Reaction and Index Movements
Wall Street took the news in stride, but volatility spiked as Powell spoke. The Dow Jones Industrial Average (DJI) slipped 0.38%, the S&P 500 (SPX) dipped 0.12%, and the Nasdaq Composite (IXIC) eked out a 0.15% gain.
Traders scaled back their expectations for a September rate cut, which before the meeting had been pegged at roughly 65%. By the end of the session, those odds had fallen closer to 50%. Treasury yields mirrored the cautious tone, first sliding and then stabilizing after Powell’s remarks dampened hopes for immediate easing.
Analysts noted that markets remain trapped between optimism for eventual cuts and the reality that the Fed is not in a hurry. The result has been choppy trading across both equities and bonds as investors digest each new data point.
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Tech Titans in Focus
Earnings season continued to drive trading in the technology sector. Microsoft (NASDAQ: MSFT) and Meta (NASDAQ: META) both reported blockbuster results, sending their shares more than 6% higher in after-hours trading.
Investors rewarded the companies for solid revenue growth and strong guidance despite macroeconomic uncertainty. Their results offered a bright spot in an otherwise hesitant market, helping support the Nasdaq even as the Fed’s decision weighed on broader sentiment.
Looking Ahead
The central bank’s path forward now depends on data arriving before its next meeting in mid-September. Reports on inflation, GDP growth, and job creation will all be critical inputs.
When asked about the upcoming September rate decision, Powell said:
You have to think of this as still quite early days. There’s quite a lot of data coming in before the next meeting. Will it be dispositive? … It is really hard to say.
For now, the Fed has made clear that it is not ready to cut rates simply because of political pressure. Its stance sets the stage for a high-stakes September meeting that could shape financial markets well into next year.
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