US interest rates: Fed chief stands firm against Trump

It is urgent to wait, according to Federal Reserve officials, who voted on Wednesday, July 30, to maintain the US central bank's key interest rates at their current level, within a range of 4.25% to 4.5%. These rates determine the cost of credit and have a strong influence on financial markets.

“Central Bank Chairman Jerome Powell Ignored White House Pressure,” Bloomberg explains . “Federal Reserve Defies Donald Trump’s Calls for Rate Cuts,” headlines the Financial Times . But the July meeting “will go down in history,” adds CNN , because this time the Fed chief had to face dissent from two of the Bank’s governors, who advocated for an immediate rate cut.

Unlike other central bankers, who often disagree on monetary policy, those at the Fed are used to displaying their consensus, The Economist points out . Today, the institution's claimed calm is being undermined "at the very moment when President Donald Trump is intensifying his attacks on the Fed and his tariffs are putting the US economy under severe strain."

Since the Fed's last meeting in June, Governors Christopher Waller and Michelle Bowman, both Trump appointees, have repeatedly made the case for a rapid reduction in interest rates, Bloomberg reports. On July 30, they voted against the majority of central bank officials. This "double dissent" is a first "in more than thirty years," The Economist notes.

Both protesters argue that households are spending less and job creation remains weak. Jerome Powell, for his part, followed by the majority of the members of the monetary policy committee, anticipates a relatively low unemployment rate and inflation above the 2% target.

At the press conference following the announcement of the rate hold, the Fed chief emphasized the uncertainties surrounding the economic repercussions of the new tariffs imposed by Donald Trump, Bloomberg reports. “I think it's still too early to understand the effects of the tariff increase on the economy,” he said. “We'll have to watch and learn.”

Under a “reasonable” scenario, the effects on inflation could be short-lived, reflecting a one-time change in the price level. “But it is also possible that the inflationary effects could prove persistent. This is a risk that needs to be assessed and managed,” Powell said. Cutting rates too early could force the Fed to raise them again later. “That would be inefficient.” But waiting too long could harm the labor market.

Speaking before the Fed's decision was announced, Donald Trump insisted on reiterating his disagreement, the Financial Times reported. "I heard they were going to do it [cut rates] in September, not today. Why? Nobody knows."