Today's News: Fed Holds Interest Rate Steady Amidst Economic Uncertainty and Political Pressure
Two Trump-appointed Fed governors dissented, advocating for an immediate rate cut, highlighting the internal divisions within the central bank.
Photo: Kent Nishimura
Overview
Date: July 30, 2025
Topic: Federal Reserve’s Decision to Hold Interest Rates Amidst Economic Uncertainty and Political Pressure
Summary: The Federal Reserve opted to keep its key interest rate unchanged for the fifth consecutive meeting on July 30, 2025, a decision widely anticipated despite intense pressure from the Trump administration to lower borrowing costs. This move came amidst mixed economic signals, including a stronger-than-expected second-quarter GDP report that nevertheless masked underlying growth moderation due to the distorting effects of tariffs and trade uncertainty. Two Trump-appointed Fed governors dissented, advocating for an immediate rate cut, highlighting the internal divisions within the central bank. Fed Chair Jerome Powell emphasized the “early days” of tariff impacts and the need for more data before considering future rate adjustments, maintaining the Fed’s focus on its dual mandate of maximum employment and stable prices.
Sources
NBC News - Fed holds interest rates steady as two Trump appointees vote to cut them
The New York Times - U.S. Economy Slowed in First Half of 2025 as Tariffs Scrambled Data
CNN - Takeaways from the Fed’s latest decision, which got pushback from officials siding with Trump
The Washington Post - Fed keeps rates steady but warns about slowing economic growth
The Wall Street Journal - Fed Holds Rates Steady, but Two Officials Back a Cut
Key Points
The Federal Reserve maintained its benchmark interest rate at 4.25% to 4.5% for the fifth consecutive meeting.
Two Trump-appointed Fed governors, Christopher Waller and Michelle Bowman, dissented from the decision, advocating for a 25-basis-point rate cut. This marks the first time since 1993 that more than one Fed governor has dissented.
President Donald Trump and his administration exerted significant public pressure on the Fed and Chair Jerome Powell to lower rates, citing economic growth and housing market benefits.
The Fed’s cautious stance is primarily driven by uncertainties surrounding the economic impact of Trump’s trade policies and tariffs, which are seen as potentially stoking inflation. Fed Chair Powell stated that it’s still the “early days” of tariff impacts.
While the second-quarter Gross Domestic Product (GDP) growth of 3% exceeded expectations, the Fed and many economists noted that this headline figure masked underlying weakness and was significantly skewed by tariff-induced swings in trade and inventories.
The Fed continues to balance its dual mandate of maximum employment and price stability. Although the labor market remains “solid,” there are signs of slowing job creation, and inflation remains “somewhat elevated” above the Fed’s 2% target, partly due to tariff-related price pressures beginning to show.
The possibility of future rate cuts, potentially as early as September, remains contingent on incoming economic data, particularly regarding inflation and labor market conditions, and how tariffs ultimately impact the economy.
Unique Highlights
NBC News notes that markets responded by selling off, and traders dialed back the odds of a September rate cut to less than 50%. It also highlights that Procter & Gamble plans to increase prices due to tariffs.
The New York Times provides a detailed explanation of how the GDP figures were skewed by tariff policies, describing the “unusual patterns in trade and spending” and the government’s measurement methods, including the role of imports and inventory estimates. It also points out that consumer spending growth, while accelerating from Q1, was well below 2024 levels, potentially signaling consumer strain.
CNN offers specific details on President Trump’s “insult-laden pressure campaign” against Chair Powell, including Trump’s visit to the Fed’s headquarters to view a $2.5 billion renovation project and his on-camera feuding with Powell over the cost, before later backing off criticism of the renovation.
Fox Business provides context on the Fed’s recent rate cuts in late 2024, including a 50-basis-point cut in September and two 25-basis-point reductions in November and December. It also includes Chair Powell’s detailed explanation on tariff costs, stating they are “mostly not paid” by exporters but by “companies or retailers,” and are “starting to show up in consumer prices.”
The Washington Post specifically mentions that Fed officials revised their assessment of economic growth from “solid” in their June meeting to “moderated” in their July statement. It elaborates on Christopher Waller’s specific argument for an immediate rate cut, highlighting his analysis of the June jobs report, where he noted that private-sector payroll growth was “near stall speed.” It also cites Atlanta Federal Reserve President Raphael Bostic’s warning that inflation could remain elevated for longer than expected, potentially over a year or more, citing survey data.
The Wall Street Journal notes the “notable shift” in Michelle Bowman’s dissent, as she had previously been a leading advocate for tighter policy and had opposed an initial rate cut last September. It also discusses Waller’s dissent in the context of his “nascent candidacy to succeed Powell as chair next spring” and quotes Richard Clarida, a former Fed Vice Chair, on how tariffs are showing up in the price index but are contained by “well behaved” services prices.
Contrasting Details
Economic Growth Interpretation: While all articles acknowledge the 3% Q2 GDP growth, The New York Times and CNN emphasize that this strong headline figure “masks underlying weakness” and was “skewed” by tariff-induced trade swings, with underlying activity showing further weakening. In contrast, NBC News highlights that the Q2 report showed “stronger than expected economic activity,” leading traders to dial back September cut odds. Fox Business quotes Powell stating that the economy’s H1 growth was closer to 1.2% when accounting for the Q1 contraction, providing a more tempered overall view.
Inflation Impact of Tariffs: NBC News states that “Trump’s tariffs are putting price pressures back into the economy,” necessitating higher rates, and notes a key inflation measure at 3% for H1. The New York Times indicates that “inflation continues to cool: Consumer prices rose at a 2.1 percent rate in the second quarter, barely above the Fed’s long-term target of 2 percent,” suggesting tariffs “have so far done little to push up prices overall.” However, Fox Business quotes Powell saying tariffs are “starting to show up in consumer prices,” but acknowledges that companies “may not be able to” fully pass costs to consumers. The Washington Post highlights Atlanta Fed President Raphael Bostic’s concern that inflation could remain elevated “for longer than many expect” due to trade policies, warning of a “more drawn-out process that could unfold over the next year or more.”
Probability of September Rate Cut: NBC News states that “traders dialed back the odds of a rate cut in September to less than 50%.” Fox Business, using the CME FedWatch tool, reports that the probability of rates staying at their current level rose to 51.8% (meaning a cut probability fell to 47.3%). In contrast, The Wall Street Journal reports that “investors are pricing in a roughly two-thirds chance that the Fed cuts rates at its next meeting in September,” albeit with specific assumptions about tariff effects and labor market softening.
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