The Federal Reserve kept its interest rate policy unchanged for the fifth consecutive meeting, resisting political pressure and signaling continued caution in the face of economic uncertainty. Despite calls for cuts from former President Donald Trump and others, the central bank opted to maintain the benchmark federal funds rate at 4.25% to 4.5%.
No Change, No Rush
In its latest policy announcement, the Federal Open Market Committee (FOMC) voted 9-2 to hold rates steady. Fed Governors Michelle Bowman and Christopher Waller dissented, advocating for a 25-basis-point cut. One governor was absent.
The decision comes as the Fed closely monitors inflation and labor market trends. Officials remain cautious, wary of acting too quickly while economic signals remain mixed.
Powell’s Take: Cautious Confidence
Federal Reserve Chair Jerome Powell addressed the media following the announcement. He described the U.S. economy as being in a “solid position,” but stressed that uncertainty remains—particularly around inflation and labor dynamics.
“Despite elevated uncertainty, the economy is in a solid position,” Powell said, citing the Fed’s dual mandate of stable prices and maximum employment. He noted that while second-quarter GDP showed a 3% annual growth rate, first-half growth was closer to 1.2% due to a 0.5% contraction in Q1.
Read: SBP Surprises Markets by Holding Policy Rate at 11%
Inflation Still a Concern
Powell acknowledged that inflation has cooled from 2022 peaks but remains above the Fed’s 2% target. He highlighted concerns over recently introduced government tariffs, which have begun to push up prices for certain goods.
“The effects of higher tariffs are starting to show in consumer prices,” Powell said, warning that their inflationary impact could either be short-lived or more persistent. “We’re obligated to ensure long-term inflation expectations remain anchored.”
He added that while companies plan to pass tariff-related costs on to consumers, competitive market forces may prevent full price transmission.
Labor Market Holding Steady
On employment, Powell stated the labor market appears “broadly in balance.” He said that recent data aligns with the Fed’s goal of maximum employment, but warned that economic changes could quickly shift that outlook.
“We’re seeing a consistent labor market. But we remain alert to any signs of softening or overheating,” Powell said.
Tariffs and Trade: A Growing Variable
With tariffs increasing and trade policies evolving under the Trump administration, Powell acknowledged that the full economic impact remains unclear. When asked about recent trade deals and their effect on economic certainty, he noted that “we’re still a ways away from seeing where things settle.”
He stressed that trade policy remains a wild card in the Fed’s economic projections.
September Cuts? Too Soon to Say
Speculation is growing around a potential rate cut in September. Powell didn’t rule it out but emphasized that the Fed needs to review more data before making any decisions.
“We’ll have two more rounds of inflation and employment data before the next meeting,” Powell said. “That information will guide our decision-making. Nothing is predetermined.”
Housing Market Pressures
Powell also addressed the Fed’s indirect influence on the housing market, where mortgage rates remain high and supply tight. He clarified that while the Fed sets short-term rates, mortgage rates depend on long-term Treasury yields and broader financial conditions.
“Housing faces a unique challenge—a persistent shortage of homes. That’s not something monetary policy can fix,” Powell said. “Our job is to support stable inflation and employment, which will help over time.”
Independence Under Fire
The Fed’s independence came into focus during the press conference, with questions about Trump’s public pressure to lower rates. Powell defended the central bank’s autonomy.
“An independent Fed has served the public well,” he stated. “We must base our decisions on data, risks, and long-term goals—not political considerations.”
He warned that politicizing interest rate decisions could undermine trust and lead to harmful economic distortions.
What Lies Ahead
The Fed’s next move remains uncertain. Officials are balancing softening inflation against the risk of persistent price increases. With two more key economic reports due before the next meeting, all eyes are now on how inflation and labor metrics evolve through late summer.
The Fed’s stance is clear for now: be patient, stay informed, and act only when the data demands it.
Follow us on Instagram, YouTube, Facebook,, X and TikTok for latest updates
