From its committee meeting today, the Federal Reserve has decided to leave its target range for federal funds unchanged at 4.25% to 4.5%.
“This was quite a good meeting, all around the table, where people thought carefully about this and put their positions out there,” remarked chairman Jerome Powell in response to two of the seven members of the Federal Reserve Board of Governors supporting a rate cut.
Governors Christopher Waller and Michelle Bowman dissented from the majority decision to keep rates unchanged in favor of a quarter-point cut. A dissent is unique and hasn’t happened since 1993, but it’s not unprecedented. Of note, Governor Adriana Kugler was absent from the committee meeting and didn’t vote.
In his press conference, Powell reiterated multiple times the dual mandate of the Federal Reserve: maximize employment and stabilize prices for the benefit of the American people.
He said, “Despite elevated uncertainty, the economy is in a solid position. The unemployment rate remains low in the labor market is at or near maximum employment. Inflation has been running somewhat above our 2% longer run objective.”
Regarding President Trump’s trade deals and tariff negotiations, Powell said, “higher tariffs have begun to show through more clearly to prices of some goods but their overall effect on economic activity and inflation remain to be seen.”
President Trump visited the central bank and its ongoing renovation project alongside Chairman Powell last week. This was during the time up to the meeting when the President encouraged the board to cut rates.
“Today, we decided to leave our policy rate where it’s been, which where I would characterize as modestly restrictive. Inflation is running a bit above 2%. As I mentioned, even excluding tariff effects, the labor market is solid–historically low unemployment. Financial conditions are accommodative, and the economy is not performing as a restrictive policy, we’re holding it back inappropriately,” he said. “It seems to, to me and to almost the whole committee, that the economy is not performing as a restrictive policy is holding it back inappropriately. And modestly restrictive policy seems appropriate. All that said, there’s also downside risk to the labor market in coming months, will receive a good amount of data that will help inform our assessment of the balance of risks and the appropriate setting of the federal funds rate.”
The board’s next meeting is in September. Powell highlights how they will continue to monitor economic conditions and the data used in their process.
“We’ll get two full rounds of employment and inflation data before the time of the September meeting,” Powell noted.
