The Federal Reserve held interest rates steady on Wednesday for a fifth meeting in a row, despite officials splintering over the right time to restart cuts after an extended pause and relentless attacks from President Trump.
In standing pat, the central bank kept interest rates at a range of 4.25 percent to 4.5 percent, a level reached in December after a series of reductions at the end of last year. It marked one of the most contentious policy votes in decades, with two members of the powerful Board of Governors dissenting.
Christopher J. Waller, a governor, and Michelle W. Bowman, vice chair for supervision — both of whom were appointed by Mr. Trump — supported the Fed lowering interest rates by a quarter of a percentage point. The last time two board members opposed a decision related to monetary policy was in 1993 when Alan Greenspan was chair.
Adriana Kugler, a governor, did not attend the meeting and so did not cast a vote.
The July meeting comes at a turbulent moment for the central bank and its chair, Jerome H. Powell, who have been the targets of an intense pressure campaign by the White House.
The president has called for borrowing costs to be three percentage points lower, arguing that the Fed is both holding back an economic boom and making the country’s debt payments more expensive by keeping interest rates at current levels.
As the Fed prepared to release its policy decision on Wednesday, Mr. Trump resumed his attacks on Mr. Powell, once again demanding lower borrowing costs.
Mr. Trump also swatted away concerns that such a move, if done prematurely, could actually exacerbate inflation, telling reporters at the White House that the Fed could simply raise rates if inflation spiked.
“What you do is, you lower them, and let’s see if there’s inflation. Right now there’s no inflation,” Mr. Trump said, adding that high interest rates had prevented some Americans from buying houses and made it more expensive for the government to borrow money.
While the president seemed to recognize that the Fed was not going to lower rates at its Wednesday meeting, he indicated that a cut could come at the Fed’s next meeting. “I hear they’re going to do it in September,” he said.
Mr. Powell, asked directly about a September cut at a news conference on Wednesday, said the Fed had made no decision about future moves. He did not rule out the option but stressed that the Fed would closely track economic data to be released in the intervening period, which will be crucial in determining whether the Fed follows through with a cut or not.
“We have made no decisions about September,” Mr. Powell told reporters. “We don’t do that in advance.”
He later added that the Fed would be looking at the “totality” of the economic data.
In recent weeks, Mr. Trump and his top aides have broadened their criticism of Mr. Powell to include his management of the central bank, fixating on a $2.5 billion renovation of the Fed’s headquarters in Washington. The president, who has previously threatened to fire the Fed chair, even went so far as to visit the active construction site last week and openly squabble with Mr. Powell in front of cameras over the cost of the project.
Mr. Powell on Wednesday said that he had a “nice visit” with the president and was honored to have hosted him.
The central bank operates independently of the White House and strives to set monetary policy free of political influence, despite Mr. Trump claims to the contrary. Mr. Powell defended that independence on Wednesday, which he said had “served the public well” and enabled the Fed to set interest rates based on what was best for the economy. He also again made clear that the Fed did not factor politics into its policy decisions and that it adjusts interest rates based solely on the economic backdrop.
Right now, however, the data is sending mixed signals, stoking divisions across the Fed about when to lower borrowing costs again. The main faultlines stem from divergent views on the health of the labor market and the perceived risk to inflation posed by Mr. Trump’s tariffs.
Mr. Waller and Ms. Bowman sit on one end of the spectrum, arguing that the labor market is flashing warning signs that the Fed should not ignore. They also assert that price pressures just now starting to bubble up because of the levies Mr. Trump imposed on the country’s biggest trading partners will fade over time.
On the other end is a sizable group of policymakers much more concerned about inflation and hesitant to lower interest rates until there is tangible evidence that the labor market is weakening. As of projections released at the last meeting in June, seven of the 19 officials forecast the Fed standing pat the rest of the year.
Occupying the middle ground are centrists who see a path to lower borrowing costs perhaps as early as September, but want to gather more data before shifting off the wait-and-see stance that has guided the central bank since January.
Mr. Powell on Wednesday sought to strike a balance between the competing camps at the central bank. He stressed that the majority of officials still thought it appropriate for the Fed’s monetary policy settings to be “modestly restrictive,” meaning that they are still holding back growth in some capacity because inflation is still above the central bank’s 2 percent target, and the labor market was still solid even as “downside risks” had risen.
That echoed the Fed’s policy statement released alongside the rate decision on Wednesday, which downgraded its assessment of the economy and acknowledged that recent indicators suggested growth had “moderated in the first half of the year.” Yet, the statement stopped short of sounding any alarm about the labor market.
“The unemployment rate remains low, the labor market conditions remain solid. Inflation remains somewhat elevated,” it said.
Inflation remains a big wild card for the Fed, especially with Mr. Trump still finalizing the tariff rates being imposed on the country’s trading partners. Mr. Powell on Wednesday said that he expected tariffs to raise consumer prices but reiterated that he expected those inflationary pressures to be temporary. He also added that companies may be finding it hard to fully pass on the higher costs associated with tariffs because their customers are either unwilling or unable to pay higher prices.
Still, inflation remains above the Fed’s 2 percent target, so that will limit how much the central bank is eventually able to cut once it restarts interest rate reductions. Mr. Powell on Wednesday signaled that the Fed’s goal was to shift toward a more “neutral” policy setting, which means a level of interest rates that neither stimulates the economy nor restrains it. At no point did he discuss easing policy so that it revs up growth.
He also did not endorse the projections released in June, which showed that most policymakers supported the Fed cutting interest rates by half a percentage point this year.
Data released on Wednesday showed that the economy grew 3 percent in the second quarter, a rebound from the first three months of the year that reflected big swings in trade and inventories as a result of Mr. Trump’s tariffs. In the aggregate, the data from the first six months of the year indicate that the economy has lost momentum. That followed a report by the Bureau of Labor Statistics tracking job openings across the country that confirmed companies are pulling back on hiring but not yet letting go of workers.
Later this week, the Fed will also get an update on their preferred inflation gauge, the Personal Consumption Expenditures price index, as well as July’s jobs report.
Colby Smith covers the Federal Reserve and the U.S. economy for The Times.
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