The Federal Reserve opted to keep interest rates steady on Wednesday, but two governors broke from the majority, marking the first instance of a double dissent at the central bank since 1993. The move underscored a growing split among policymakers over the future direction of monetary policy.
The Federal Open Market Committee (FOMC) maintained its benchmark interest rate in the range of 4.25% to 4.50%. However, Governors Michelle Bowman and Christopher Waller opposed the decision, favoring a 25 basis-point rate cut instead. Waller cited signs of weakness in the labor market as a reason to begin easing policy.
Speaking at a press conference after the decision, Fed Chair Jerome Powell said he welcomed differing perspectives within the committee. He cautioned, however, that a cooling in labor demand should not be viewed in isolation, noting that the unemployment rate remains low partly because the labor supply has also declined—an outcome he linked to former President Trump’s stricter immigration policies.
He also added that while the committee expect a surge in inflation to be a one-off increase due to Trump’s tariffs, underlying in the economic strength indicates that there are still rooms to keep rate on hold until there are further clarity on inflation.
Following the Fed’s decision and Powell’s comment, odds for a 25 basis points rate cut in September dropped from 63% to 45%, while the chance for the central bank to maintain rates rose from 35% to 54%, according to CME FedWatch Tool.
