The Federal Reserve held interest rates steady Wednesday for the fifth meeting in a row as two Fed governors dissented, underscoring the division within the central bank over the potential impact of President Trump’s tariffs.

Central bank policymakers voted to maintain the Fed’s benchmark interest rate in the range of 4.25%-4.5% as they have throughout 2025, after cutting rates by a full percentage point last fall.

Fed governors Christopher Waller and Michelle Bowman disagreed with the decision and preferred to cut rates by a quarter percentage point, the first time two governors have dissented on a monetary policy decision in more than three decades.

Officials on the Fed’s Federal Open Market Committee noted economic growth has “moderated” in the first half of the year, noting that net exports continue to impact the data. The change in characterization marked a downgrade of the economy from “solid” in June.

The acknowledgement comes after a report Wednesday morning showed GDP rebounded to 3% after contracting in the first quarter by 0.5% due largely to a rush by importers to beat the start of Trump's tariffs. Growth overall has moderated in the first half of 2025.

Fed officials reaffirmed that they view the job market as “solid,” but still see inflation as “somewhat elevated.”

Officials also noted that “uncertainty about the economic outlook remains elevated,” after stating back in June that “uncertainty has diminished, but remains elevated.”

The rate hold once again defies calls from President Trump and other White House officials for immediate cuts. Trump has repeatedly asked for rates to be 3 percentage points lower, arguing it will save on US debt interest costs while making borrowing less expensive for home buyers.

He repeated that call in the hours before the Fed’s latest decision to hold, saying in a Truth Social post that "’Too Late,’ MUST NOW LOWER THE RATE," using his nickname for Fed Chairman Jerome Powell. “No inflation! Let people buy, and refinance, their homes!”

Powell, the target of unrelenting attacks from the president and his allies, has been urging patience as the central bank assesses how Trump’s tariffs will affect the path of inflation and the strength of the US economy.

Traders expect the first cut of the year to happen in September, at a meeting on Sept. 16-17. That gives the Fed two more months of inflation and employment readings to digest, starting with new data released Thursday and Friday.

The debate will likely heat up in the weeks ahead. Waller has been particularly outspoken since the Fed’s last meeting in June about the case for cutting rates sooner rather than later, noting that he believes tariffs offer one-off price increases, allowing the Fed to "look through" them and refocus on the employment side of its dual mandate.

Waller has argued his view is “not political” even though it does align with the White House perspective. He is considered among the candidates to replace Powell when the chairman’s term is up next May. He was appointed to his current post by Trump.

Bowman, another Trump appointee, has been making the same argument for a rate cut, noting that trade policy will only amount to "minimal impacts" on inflation and that downside risks to employment could become bigger.

Bowman's support for an easing 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.

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 bias toward looser monetary policy and wanted to 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 have been from Fed governors.

The decision to keep rates on hold will likely increase tensions with the White House, which is now also invoking a $2.5 billion renovation of the Fed's headquarters as a way to question the chair's management of the institution.

Trump played down his tensions with the Fed chair during a visit to the construction project last week as he continued to distance himself from an effort to fire Powell. He said the Fed visit was about helping get the project finished, adding, "I don't want to be personal."

Later, Trump said of firing Powell: "To do that is a big move, and I just don’t think it’s necessary."

Asked last Thursday what might lead him to back off the barrage of critiques that Trump has been leveling against Powell for weeks, the president said, "I'd love him to lower interest rates," before patting Powell on the back.

In the hours before the Fed's Wednesday decision, Trump said "'Too Late,' MUST NOW LOWER THE RATE," in a Truth Social post, again using the nickname he has applied this year Powell, but then added later at a a bill signing ceremony that "we have somebody that doesn't want to lower interest rates and probably won't lower them today."

"It's a really sort of an amazing situation," the president added.

The pressure is not expected to let up this fall. In the coming weeks, Powell will wrestle with calls for an "exhaustive internal review" of the Fed's operations and pressure from Republicans on Capitol Hill that could ramp up.

Rep. Anna Paulina Luna of Florida, another Trump ally, has formally requested that the DOJ investigate Powell for perjury over June comments about the renovations. That is seen as a long shot at best.

Perhaps more pressing is that House Speaker Mike Johnson said in an interview with Bloomberg last week that he is "disenchanted" with Powell and is even open to modifying the 1913 act that created the Fed.

That would be a major change, but it is not expected to be before Congress in the near term, as the House of Representatives is now home on a recess that is scheduled to last for the rest of the summer.

Republican Sen. Tim Scott — who asked Powell about the Fed's renovations during a June 25 hearing — has also sent Powell a letter asking for more questions to be answered by Aug. 8. He said there were "distinct differences" between public plans about the renovation, Powell's testimony, and what the Fed has said on its website.

Treasury Secretary Bessent additionally called for an "exhaustive internal review" of the Fed, saying it could be Powell's "legacy," as he accused the central bank of mission creep in its non-monetary policy activities.

Trump has signaled his support for the effort, and some observers say this could be the most consequential change if the idea gains steam and looks to reshape how the central bank operates.

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