Central Bank Maintains Key Interest Rate Amidst President Trump's Persistent Urging During Fifth Successive Meeting
In the latest decision by the Federal Reserve, the central bank has chosen to keep its benchmark interest rate unchanged, marking the fifth consecutive meeting with no change since July 2025 [1][4]. This decision comes amidst pressure from President Trump to lower rates, but Fed Chair Jerome Powell has emphasized caution due to economic uncertainties, particularly the impact of tariffs on inflation [1].
The Fed's current stance is a "wait-and-see" approach, monitoring economic data and inflation before considering any future cuts. In the recent FOMC meeting, there was rare dissent from two members, Michelle Bowman and Christopher Waller, who voted to lower rates, but the majority voted to hold steady [1][4].
Powell's comments in the post-meeting press conference reaffirmed the committee’s position that economic conditions, including a solid labor market and moderated growth, do not yet justify lowering rates [1][4]. However, some economists predict that cuts may still occur later in 2025 or 2026 if economic and labor market conditions deteriorate visibly. For instance, Oxford Economics expects two rate cuts in 2025 followed by further easing in 2026 [3].
The housing market has experienced a slowdown due to elevated mortgage rates and tight supply, contributing to a long-term housing shortage [2]. Inflation has eased from its 2022 highs, but remains elevated relative to the Fed’s 2% longer-run goal [1]. Companies are expected to pass on the costs of higher tariffs to consumers, although their ability to do so may vary [1].
Despite the pressure from President Trump, the Fed's independence remains crucial for making decisions based on data and evolving outlook, not political factors [2]. The labor market is "broadly in balance and consistent with maximum employment" [1]. Second quarter GDP grew at an annual rate of 3%, indicating some economic growth [1].
The Fed will hold its next meeting on September 16 and 17, where rate cuts could occur if the economic and inflation outlook changes [1]. The Federal Reserve does not set mortgage rates directly, but its decisions can impact them indirectly [2].
Sources:
[1] Fed keeps interest rates unchanged, citing economic uncertainty and inflation risks [2] Housing market slows due to elevated mortgage rates and tight supply [3] Oxford Economics predicts two rate cuts in 2025 and further easing in 2026 [4] FOMC meeting minutes reveal rare dissent from two members on interest rate decision
- The Federal Reserve's decision to maintain its benchmark interest rate is influenced by economic uncertainties, particularly the impact of tariffs on inflation.
- Companies may pass on the costs of higher tariffs to consumers, although their ability to do so may vary.
- The housing market has experienced a slowdown due to elevated mortgage rates and tight supply, contributing to a long-term housing shortage.
- The Fed's independence remains crucial for making decisions based on data and evolving outlook, not political factors.
- The Fed's decisions can impact mortgage rates indirectly, but it does not set mortgage rates directly.
