(NewsNation) — The Federal Reserve held interest rates steady on Wednesday, as officials remain cautious amid a swirl of recent economic data.
The pause marked the Fed’s fifth straight meeting without a rate change, despite mounting pressure from President Donald Trump to ease borrowing costs.
In announcing the decision, policymakers noted that while unemployment remains low and labor market conditions are solid, inflation remains “somewhat elevated.”
“Despite elevated uncertainty, the economy is in a solid position,” Powell said at a press conference Wednesday, emphasizing the Fed’s dual mandate of maximizing employment while keeping inflation in check.
Powell defended the pause, saying the economy “is not performing as if restrictive policy were holding it back inappropriately.”
Earlier in the day, Trump hailed a new GDP report showing the U.S. economy expanded at a surprisingly strong 3% annual rate in the second quarter and called on Powell to cut rates.
““Too Late” MUST NOW LOWER THE RATE,” Trump wrote on Truth Social. “Let people buy, and refinance, their homes!”
While a rate cut could lead to lower borrowing costs on mortgages, auto loans and credit cards, it’s not guaranteed — and there are reasons policymakers have remained in a wait-and-see mode.
However, Wednesday’s decision wasn’t unanimous. Governors Christopher Waller and Michelle Bowman voted to reduce borrowing costs, while 9 officials, including Powell, voted to stay the course.
It is the first time in more than three decades that two of the seven Washington-based governors have dissented, according to the Associated Press.
Since the Fed began hiking rates in March 2022, inflation has fallen significantly, but concerns persist, especially with Trump’s tariffs stoking new fears.
Inflation accelerated 2.7% in June from a year earlier, the fastest annual pace since February. Economists warn that Trump’s import taxes could drive prices higher for American consumers, though the full impact has yet to be felt.
“Services inflation has continued to ease while increased tariffs are pushing up prices in some categories of goods,” Powell said Wednesday.
If the Fed lowered interest rates now, it could fuel inflation at a time when the effects of Trump’s trade policies are starting to appear at the checkout lane.
Meanwhile, the job market has cooled, yet it’s still holding up better than many expected. The unemployment rate ticked down to 4.1% in June from 4.2% in May.
So far this year, employers have added an average of 124,000 jobs per month. That’s well below the red-hot pace from 2021 through 2023, when monthly gains averaged 400,000, but still reflects a relatively resilient labor market.
Consumer spending has slowed, but likely not enough to prompt policymakers to slash interest rates, a move that would signal an effort to stimulate growth.
Trump’s trade policy is another wildcard.
Wednesday’s interest rate announcement comes just two days before a new round of global tariffs is set to take effect. Trump said Wednesday he’s holding firm on his Aug. 1 deadline, even though several major U.S. trading partners have yet to reach deals.
That means companies importing goods from Canada, Mexico, South Korea, Brazil and other key partners could face higher tariffs within days.
The Associated Press contributed to this report.