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Although pressure on the Federal Reserve to cut interest rates has been building to Category 5 levels, the Federal Open Market Committee stood strong and held interest rates steady at between 4.25% and 4.50% for its fifth straight meeting.
This news surprised no one, although all eyes and ears were glued on chair Jerome Powell’s every word for hints about whether the Fed will cut rates at its next meeting September 16–17. But the characteristically stoic Powell did not tip his hand.
“We have made no decisions about September,” he said at the press conference this afternoon. “We don’t do that in advance. We’ll be taking that information into consideration and all the other information we get as we make our decision.”
Powell’s pickle
President Trump’s increasing demands for rate cuts from the FOMC have been well documented, culminating in the president accusing “Mr. Too Late” Powell of bungling the $2.5 billion renovation of the Federal Reserve’s headquarters.
But now, Powell is facing dissent in his own ranks. Fed Governor Christopher Waller and Vice Chair for Supervision Michelle Bowman voted to cut rates by 25 basis points, the first time more than one sitting governor has diverged from the typical near-unanimous 12-member committee since 1993. They’ve also pushed for rate cuts publicly, arguing that tariffs haven’t fanned inflation as much as feared and that the job market is showing signs of losing steam.
“The Fed is committed to their wait-and-see approach despite the President's ongoing pressure on Chairman Powell to lower rates,” Senior Investment Strategist at BondBloxx JoAnne Bianco told Brew Markets. However, “It was interesting that the Fed made only modest changes to its policy statement and did not hint at a timetable for resuming rate cuts. The September meeting will now prove to be pivotable in terms of its way forward for monetary policy.”
CME's FedWatch tool, which attempts to predict Fed moves based on futures prices, currently puts the odds of a September rate cut at 45%. While that’s much lower than the 63.3% reading as of yesterday, two rate cuts are still expected before the end of the year.
However quickly those rate cuts come, it won’t be fast enough for Trump, who quipped Wednesday, “He is always too late, even if he does it today.”—JD