In a split decision, the Federal Reserve on Wednesday left its key policy rate unchanged yet again, hours after President Donald Trump called on Fed Chair Jerome Powell to cut rates and boost the housing market.
As was widely expected, Fed policymakers left the central bank’s overnight rate unchanged at a range of 4.25% to 4.5%, where it has remained since December. But for the first time in 30 years, two voting members of the Federal Open Markets Committee dissented with the majority.
Fed Governors Michelle Bowman and Christopher Waller instead voted for a quarter-point rate cut, marking the first time since 1993 that more than one FOMC member has diverged from the consensus.
The split decision comes at a time of remarkable political polarization over Fed rate policy, with Trump and his allies insisting for months that inflation is fully under control and demanding lower rates.
On Wednesday morning, Trump had written on his Truth Social site that Powell “MUST NOW LOWER THE RATE,” adding, “No Inflation! Let people buy, and refinance, their homes!”
Mortgage rates have remained stuck above 6.6% since the beginning of the year, contributing to historically bad affordability conditions for homebuyers and severely depressed home sales activity.
Still, it’s unclear whether a Fed rate cut would offer significant relief to mortgage borrowers. The Fed doesn’t set mortgage rates, which instead track long-term bond yields. Bond markets would have to view a central bank rate cut as credible and justified to move the needle for mortgage rates.
In public comments, Powell has said that the Fed remains concerned about the impact of Trump’s trade policy on both inflation and the labor market, and plans to take a cautious approach before lowering rates.
“Higher tariffs have begun to show through more clearly to prices of some goods, but their overall effects on economic activity and inflation remain to be seen,” Powell said at a press conference on Wednesday.
Major economic reports released earlier this month showed rising inflation and a still-strong labor market, indicators that made a rate cut at this Fed meeting seem extremely unlikely.
Annual inflation as measured by the Consumer Price Index jumped to 2.7% in June, while the unemployment rate dropped slightly to 4.1% as the economy added 147,000 jobs last month, beating analyst expectations.
The Fed has a dual mandate to achieve 2% inflation and maximum employment, using higher interest rates to control prices and lower rates to spur more job creation.
Developing story, more to follow.
