US Fed stands firm amid Trump push, divisions widen
Federal Reserve Holds Rates Amid Trade Turmoil
Key Decision and Internal Debate
The Fed kept rates unchanged at a 4.25%–4.50% range for a fifth straight meeting, but two governors dissented—the first split on rates since 1993.
Fed Chair Jerome Powell described the session as a “good meeting” and called the trade negotiations a “very dynamic time,” noting uncertainties still loom.
Economic Review and Inflation Outlook
- First‑half economic activity slowed, yet the labor market remains “solid”.
- Inflation pressures persist, raising concerns about future policy moves.
- Markets expect a July rate cut if employment and inflation trends shift.
Tariff Impact and Trade Uncertainty
President Trump announced a new raft of tariffs, including on copper, adding to the Fed’s policy challenges.
Economists warn that the full effects of tariffs may take 6–18 months to materialize.
Leadership and Independence
Despite vocal pressure from the president—calling Powell a “numbskull”—the Fed chair reasserted the central bank’s independent role and defended his term, set to end in May 2026.
Future Outlook and Monitoring
Economists anticipate that July and August labor reports will be pivotal for future Fed action.
Current employment data for July is due Friday, and EY chief economist Gregory Daco warns that tariff-driven price pressures are filtering through the economy, affecting earnings, input costs, and retail sales.
Overall, the Fed appears to adopt a “wait‑and‑see” approach, keeping market expectations on hold for a few more months while navigating the complex interplay of trade policies and economic indicators.
