WASHINGTON – The Federal Reserve, split Wednesday, voted to stabilize benchmark interest rates despite a barrage of criticism from President Donald Trump and two senior officials.
The Federal Open Market Committee is the group that sets overnight borrowing rates and voted on hold 9-2. Federal fund rates continue to be set in the range of 4.25% to 4.5%. Levels set out what banks charge each other for lending overnight, but affect many other rates across the economy.
However, the decision met opposition from Gov. Michelle Bowman and Christopher Waller. Michelle Bowman and Christopher Waller both argue that inflation is controlled and that easing begins with the recognition that the labor market may soon weaken. It was the first time since late 1993 that multiple governors had not voted for a fee decision.
The post-meeting statement only provided changes on how the committee views the economic situation.
“While net export fluctuations continue to affect data, recent indicators suggest that economic activity growth has eased in the first half of the year,” the document states. “Unemployment remains low and labor market conditions remain strong. Inflation remains slightly rising.”
At its June meeting, the committee was more optimistic and said the economy “continued to expand at a solid pace.”
A statement on Wednesday said uncertainty about the conditions “remained rising” and there was no positive review from June.
The committee has stopped supporting that view, but slower economy will encourage discussions on low interest rates.
“There are no decisions regarding September.”
Fed Chair Jerome Powell said at a press conference that the committee has yet to decide whether to cut the fees at its September meeting.
“We haven’t made any decisions about September,” he said. “We don’t do that in advance. We take that information into consideration and all the other information we get when we make our decisions.”
The market was overwhelmingly unanticipated in its profitable fees and actions on stocks after the decision was announced. Investors were expected to look into the extent of disagreement in the committee, which normally has 12 votes, but Governor Adriana Kugler was not present at the meeting. Traders expect the Fed to cut in September, but this could change depending on the data flow. Fed officials in June narrowly showed they were seeing two total cuts this year.
The news has at least avoided political conflict, but continues to grow astoundingly for the very largely shaky entity in the economy.
Trump’s promotion of interest rate reductions
Trump called for Powell to resign and messed with the legally suspicious idea of firing him. He has largely setbacked the threat of dismissing Powell, but the president has maintained criticism of the former appointees he now calls “too late.”
The president has suggested that the Fed will lower the benchmark rate by 3 percentage points, which will cut the massive costs of surged government bonds and support the mo-death housing market.
The Trump administration tore Powell and the central bank’s cost overrun with a massive renovation project on two of Washington’s Fed buildings, in addition to Hectoring. Powell argues that overruns are not a product of mismanagement and will increase costs since the project began.
Wednesday brought more news that could affect the Fed’s path.
The Commerce Department reported that GDP grew at an annual rate of 3% in the second quarter, significantly stronger than expected. Much of the headline’s profits were driven by the return of a massive first quarter import surge ahead of Trump’s tariffs, but the report nevertheless reinforced the concept of the economy to a solid ground.
Furthermore, the report showed that inflation was running at a rate of just 2.1% during this period, according to the Fed’s main forecasting tool. Core inflation was a bit high at 2.5%, but both numbers plunged from first quarter levels, approaching the Fed’s 2% bogey.
“We respect their independence 100% in the White House, but we want to respect their analysis,” Kevin Hassett, director of the National Economic Council, told CNBC on Wednesday. “The Fed hopes to catch up with the data soon. That’s going to be a really big, positive story.”
The next Fed will meet at their annual retreat in Jackson Hole, Wyoming in late August. The event has historically featured major policy speeches from the chairperson.
