Fed Holds Rates Steady at 4.5% Amid Trump Pressure and Two Dissents

The Federal Reserve maintained interest rates at 4.5% in July 2025, despite growing calls for rate cuts, including from President Donald Trump, and two dissenting votes from Federal Open Market Committee (FOMC) members Christopher Waller and Michelle Bowman, who supported a 0.25 percentage point reduction [1]. The decision marked a rare departure from consensus, signaling internal divisions within the Fed as it grapples with a complex economic landscape. The decision document noted dissent, indicating that the FOMC’s stance may be evolving, possibly aligning with Trump’s economic priorities [3].

In his post-meeting remarks, Federal Reserve Chair Jerome Powell reiterated the central bank’s commitment to maintaining monetary independence amid political pressure. He emphasized that no decisions had been finalized for the upcoming September meeting, highlighting the need to evaluate new economic data before determining the next course of action [3]. Powell acknowledged that inflation remains slightly above the 2% target, with core inflation rising to 2.3% in May, and noted the potential inflationary pressures from Trump’s new trade agreements, which include 25% tariffs on Indian imports and an undisclosed final trade rate with the European Union [3]. The effects of these tariffs on inflation and economic activity remain uncertain, with Powell suggesting that businesses may struggle to pass increased costs to consumers [3].

Second-quarter GDP surged by 3% on an annualized basis, largely driven by a drop in imports [3]. However, Powell pointed to a moderation in economic growth, with consumer spending slowing despite the strong GDP figure. He also highlighted that the labor market remains close to maximum employment, with low unemployment rates and generally balanced labor conditions [3]. That said, he noted downside risks and indicated that more data would be needed before making any decisions.

Analysts have observed a subtle shift in the Fed’s tone. Seema Shah of Principal Asset Management noted that Waller’s dissent signals a growing data-dependent approach to monetary policy [3]. Isaac Stell of Wealth Club praised the Fed’s independence, calling the decision a rejection of political interference [3]. Richard Carter of Quilter Cheviot suggested that the Fed is adopting a slightly more dovish stance, with the September meeting potentially serving as a turning point [3].

Market expectations for rate cuts remain cautious. While the CME FedWatch data showed a 43% probability of a 0.5 percentage point cut by December, money markets still priced the first cut to occur in October, with little anticipation of a September move [2]. Powell reiterated that no decisions had been made, leaving the market to speculate over the coming months.

With the Fed’s policy review set to conclude by the end of summer and only three more meetings ahead, the central bank’s ability to balance price stability and employment goals will be closely watched. The evolving economic landscape, driven by shifting market expectations, Trump’s trade policies, and ongoing geopolitical tensions—including the possibility of secondary sanctions on Russia if the Ukraine conflict continues—adds to the uncertainty. The Fed’s next move will depend on how these factors unfold in the coming weeks [3].

Source: [1] https://www.staradvertiser.com/2025/07/30/breaking-news/fed-holds-rates-steady-despite-trumps-pressure-with-2-dissenting-votes/

[2] https://www.wsj.com/livecoverage/fed-meeting-interest-rate-decision-07-30-2025/card/where-are-fed-rates-headed-see-how-forecasts-have-shifted-this-year--fKA7uBp3oZQyIOhoP1Yk?gaa_at=eafs&gaa_n=ASWzDAi33Hpl2_h-lMIWuYAqFipkS_OMrgngQN66JDlb9Ay7cycfP4h426m4&gaa_sig=TU1u3p1lqWzgO8RVQNAb3wUIiEEVZwZ1Fm8fQvYLKCd9N4KyO7elzDNBuN1lTv-2ZCE6xxrYuvMhfjHFJvgXEw%3D%3D&gaa_ts=688a6ec8

[3] https://www.telegraph.co.uk/business/2025/07/30/us-economy-surges-in-boost-for-trump/