The Federal Reserve is widely expected to hold interest rates steady Wednesday amid internal divisions over the path of monetary policy as President Trump and other White House officials intensify their pressure on the central bank.
Trump added to that pressure Wednesday morning following the release of economic data showing that gross domestic product grew at annualized pace of 3% in the second quarter.
“‘Too Late,’ MUST NOW LOWER THE RATE,” Trump said in a Truth Social post, again using the nickname he has applied this year to Fed Chairman Jerome Powell.
Investors will be watching today to see whether two Fed governors agree with Trump and choose to dissent from the central bank’s monetary policy decision, which would mark the first time that has happened in more than three decades. Fed governors Christopher Waller and Michelle Bowman have both made a case publicly for a cut at today’s meeting.
Michael Feroli, chief economist for JPMorgan, said he expects that Waller will dissent, while Bowman is a closer call, but “we suspect she joins him and dissents dovishly.”
Wilmer Stith, senior bond portfolio manager for Wilmington Trust, said one dissent is more likely than two, but he noted that “at the end of the day it doesn’t change the fact that the Fed funds rate will remain unchanged and that they will be patient. That’s the narrative.”
That raises another pressing question for investors: whether Powell will give any signal at his Wednesday afternoon press conference that he is open to a rate cut in September. Traders are currently betting the Fed will use that gathering on Sept. 16-17 to make the first cut of 2025.
Read more: How the Fed rate decision affects your bank accounts, loans, credit cards, and investments
Federal Reserve Chair Jerome Powell speaks with Fed governor Michelle Bowman during a Federal Reserve Board meeting on June 25. (Saul Loeb/AFP via Getty Images) ·SAUL LOEB via Getty Images
Stith said he thinks Powell may offer some dovish comments that set the table potentially for a move in September, following months of unrelenting criticism from Trump and other White House officials who are now citing a $2.5 billion renovation of the Fed’s headquarters as another reason to question Powell’s management.
“Given the cost overruns at the [Fed’s headquarters], and the constant harping by the administration, I think that does play on the psyche,” Stith said. “So a politician would probably open the door just a little bit. Before the door was always closed.”
Read more: How much control does the president have over the Fed and interest rates?
Powell has defended the $2.5 billion renovation project while also insisting for months that more time is needed to assess how the president’s tariffs will affect the path of inflation.
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Many of his fellow policymakers agree with that stance, noting that inflation remains above target, inflation risks still pervade, and the labor market is near full employment.
Waller, on the other hand, has been outspoken since the Fed’s last meeting in June about his belief that tariffs offer one-off price increases, allowing the Fed to “look through” them and refocus on the employment side of its dual mandate.
Waller said he worries that private sector job growth is near “stall speed.” Other data suggests that downside risks to the job market have increased.
Bowman’s case for a cut is that inflation has declined or come in below expectations over the past several months and that trade policy will only amount to “minimal impacts” on inflation. She has also cited concerns about downside risks to employment due to signs of fragility in the job market.
Bowman’s support for a cut represents a shift in her views since last fall, when she dissented against a jumbo 50-basis-point reduction in September 2024 due to her concerns that inflation was not yet under control.
Read more: How jobs, inflation, and the Fed are all related
Two Fed governors haven’t dissented at the same meeting since December 1993 under then-Fed Chair Alan Greenspan, when governors Wayne Angell and Lawrence Lindsey both opposed the Fed’s looser monetary policy and preferred to instead hike rates.
Of the 61 meetings Powell has chaired, there have been 16 dissents. Of the dissents, 14 were from regional bank presidents, and two were from Fed governors.
One double-dissent from regional Fed presidents came in July 2019, when a Powell-led Fed cut rates for the first time in a decade to deal with uncertainties caused by Trump’s first-term tariffs.
Kansas City Fed president Esther George and Boston Fed president Eric Rosengren both dissented because they thought rates should have remained unchanged.
Despite any dissents on Wednesday, most Fed watchers expect Powell to defend the central bank’s patient stance thus far in 2025.
“The Fed’s not going to do anything, and I think Powell is going to continue to dig in his heels, and he has, frankly, firm ground to stand on,” Thornburg Investment Management’s Christian Hoffman told Yahoo Finance.
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