In a widely expected move, the Federal Reserve on Wednesday kept the federal funds rate unchanged at 4.25%–4.5% for the fifth consecutive meeting, as officials continue to assess inflation dynamics and global trade tensions.
The decision by the Federal Open Market Committee (FOMC) came with a rare twist: for the first time since 1993, two Fed governors dissented, advocating for a rate cut instead of maintaining the status quo.
Muted Market Reaction
Initial market response was restrained:
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Stocks held onto earlier gains
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Treasury yields remained elevated
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The U.S. dollar remained firm amid higher-than-expected GDP data and steady inflation readings
Attention now turns to Fed Chair Jerome Powell’s press conference, where markets are hoping for clarity on whether the central bank will consider easing rates at the September meeting.
Economic Data and Trump’s Pressure
Ahead of the Fed’s announcement, President Donald Trump had publicly urged the central bank to cut rates immediately. Citing better-than-expected GDP figures, Trump wrote on social media:
“Growth came in stronger than anyone predicted — we need rate cuts now!”
New data released Wednesday showed the U.S. economy expanded by 3% in the second quarter (April–June), rebounding from a contraction in Q1. Core inflation also ticked slightly higher, reinforcing the Fed’s cautious approach while giving Treasury yields a boost.
Global Tensions Loom
Beyond domestic economics, Trump’s policy announcements added complexity to the Fed’s calculus. Just hours before the FOMC statement, Trump confirmed the U.S. would impose a 25% tariff on Indian imports starting August 1, citing India’s continued purchase of Russian energy and military equipment.
He also warned of a “penalty” on top of the tariff, escalating tensions with one of America’s key trading partners. The announcement rattled currency markets, sending the Indian rupee sharply lower against the U.S. dollar.
What’s Next?
With inflation still above the Fed’s 2% target and geopolitical risks rising, the central bank faces a delicate balancing act. Powell’s post-meeting remarks will be closely analyzed for signs of any policy pivot ahead of the September meeting.
Bottom line: The Fed is holding steady—for now. But global pressure, political interference, and fresh inflation data could soon tip the scales.
