The Fed holds rates steady for the fifth time this year, but some officials think it's the wrong call

Jerome Powell said the Fed will hold interest rates steady in July.Chip Somodevilla/Getty ImagesThe Federal Reserve will hold interest rates steady, aligning with market expectations.Strong job growth and rising inflation likely influenced the Fed's decision to maintain rates.Two Fed governors dissented from the decision, preferring lower rates.America's central bank is once again holding interest rates steady, although two Fed governors disagreed with the move in a rare departure from the committee's typical unanimity.The Federal Open Market Committee announced Wednesday that it will not cut its benchmark rate, holding for the fifth time this year. It's a decision in line with forecasts: CME FedWatch, which anticipates interest-rate changes based on market moves, had projected a 96.9% chance of a hold in July. The Fed said in its July 30 statement that strong jobs numbers and a recent uptick in inflation contributed to the call.Fed Governors Christopher Waller and Michelle W. Bowman dissented from the hold decision, saying they preferred a rate cut.While there's still time for the Fed's two penciled-in cuts in 2025, some economists and Trump administration leaders hoped for a change sooner rather than later. They've put the central bank — and chair Jerome Powell — in the hot seat.President Donald Trump has consistently pushed for Powell to cut rates, writing in a July 8 Truth Social post that "'Too Late' Jerome Powell," "has been whining like a baby about non-existent Inflation for months, and refusing to do the right thing. CUT INTEREST RATES JEROME — NOW IS THE TIME!" Trump has also suggested removing and replacing Powell before the end of his tenure next year, though Wall Street leaders and top CEOs have warned that changing the Fed's leadership could have significant market consequences.Trump's cabinet members have echoed his criticisms. Treasury Secretary Scott Bessent said in an interview last week that the Fed is "fear-mongering over tariffs," and "I think that what we need to do is examine the entire Federal Reserve institution and whether they have been successful." Commerce Secretary Howard Lutnick added that Powell is "doing the worst job" and "I don't know why he's torturing America this way. Our rates should be lower."Waller, the dissenting Fed governor, also pushed for a rate cut ahead of Wednesday's meeting: "With inflation near target and the upside risks to inflation limited, we should not wait until the labor market deteriorates before we cut the policy rate."The Fed's play to keep rates steady could be a response to key indicators of economic health. The US labor market exceeded expectations by adding 147,000 jobs in June — due mostly to growth in the healthcare and hospitality sectors — and unemployment cooled to 4.1%. Consumer sentiment and retail spending are making a small recovery from early summer dips, and GDP rose more than expected this month. Inflation climbed to 2.7% in June from 2.4% in May, moving further from the Fed's 2% goal. Keeping rates unchanged could be a strategy to curb further inflation while the Fed still sees positive momentum in the job market.Powell has also said that he's waiting to see the full economic impact of Trump's tariff agenda before making a rate change. The White House's next planned tariff deadline is August 1, which could place new levies on top trade partners. The president struck a deal with the European Union earlier this week, which sets a 15% tariff on most imported European goods, a reduction from Trump's planned 30% tariff.The Fed chair has emphasized in recent meetings that his top priorities are to promote maximum US employment and stable prices."The credibility of the Fed on price stability is very very important. People believe that we will bring inflation down," Powell told Congress last month, adding, "That credibility once lost is very expensive to regain."Read the original article on Business Insider

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