
Fed holds rates steady but sees first double dissent in three decades
The Federal Reserve kept short-term interest rates at a level of 4.25 percent to 4.5 percent on Wednesday, but the vote saw the first double dissent from Fed board officials in more than 30 years. …
The Federal Reserve kept short-term interest rates at a level of 4.25 percent to 4.5 percent on Wednesday, but the vote saw the first double dissent from Fed board officials in more than 30 years.
Nine members of the Federal Open Market Committee (FOMC) agreed to keep rates where they are.
But Fed Vice Chair of Supervision Michelle Bowman and Gov. Christopher Waller — who are both in the running for President Trump’s nomination to replace Fed Chair Jerome Powell — voted to lower them, following an immense pressure campaign from the president.
It was the first time two members of the Fed board, which usually votes unanimously, dissented in more than 30 years. All members of the Fed board are part of the FOMC, which also includes a rotation of regional reserve bank officials.
Powell downplayed the significance of the dissents during a Wednesday press conference, praising Bowman and Waller for laying out clear and logical cases for their decisions during the meeting.
“This was quite a good meeting all around the table,” Powell said. “People thought carefully about this and put their positions out there.”
“The majority of the committee was of the view that inflation is a bit above target. Maximum employment is at target. That calls for modestly restrictive [interest rates] in my way of thinking,” Powell continued.
“But we had two dissenters …. you want that clear thinking — expression of your thinking, and we certainly had that today.”
Some “will be keen to accuse Bowman and Waller of being partisans, easily swayed by Trump’s browbeating,” former Fed analyst Skanda Amarnath wrote on social media. “They’ve always been nonpartisan in their analysis and deserve to be taken seriously.”
The continued interest rate pause keeps rates where they have been since January and was in line with expectations from financial markets. Interest rate futures contracts put the odds of a pause at 96.9 percent just before the decision.
The hold-steady comes as prices have started to tick back upward — likely a result of tariffs imposed as part of President Trump’s trade war.
The consumer price index slid up in June to a 2.7 percent annual increase from 2.4 percent in May. The personal consumption expenditures price index inched up to a 2.3 percent annual increase in May from 2.2 percent in April.
Economists have attributed the moves to businesses passing along cost increases coming from tariffs. Cost increases have shown up in electronics, home furnishings and apparel — all items that are sensitive to import taxes.
Tariffs notwithstanding, underlying inflation is still showing signs of life. That’s arguably more important to the Fed, though Powell said earlier this month that the central bank would have started cutting rates if it weren’t for Trump’s import taxes.
Powell said Wednesday that despite a rash of recent White House trade deals, there is far too little evidence by which to judge the economic impact of the tariffs.
“You have to think of this as still quite early days, and so I think what we’re seeing now is substantial amounts of tariff revenue being collected,” Powell said.
“We know from surveys that companies feel that they have every intention of putting this through to the consumer, but truth is, they may not be able to in many cases. We’re just going to have to watch and learn empirically,” he said.