Fed Leaves Interest Rates Unchanged
The Federal Reserve held interest rates at 4.3% for the fifth time this year, citing inflation concerns and tariff uncertainty. The economy grew 3% in Q2.
WASHINGTON — The Federal Reserve left its key short-term interest rate unchanged for the fifth time this year, brushing off repeated calls from President Donald Trump for a cut.
The Fed’s decision Wednesday leaves its key short-term rate at about 4.3%, where it has stood after the central bank made three cuts last year. Chair Jerome Powell has said the Fed would likely have cut rates already if not for Trump’s sweeping tariffs. Powell and other Fed officials say they want to see how Trump’s duties on imports will impact inflation and the broader economy. So far the duties have lifted costs of some goods, such as appliances, furniture, and toys and overall inflation has risen a bit, though less than many economists had expected.
There were some signs of splits in the Fed’s ranks: Governors Christopher Waller and Michelle Bowman voted to reduce borrowing costs, while nine officials, including Powell, favored standing pat. It is the first time in more than three decades that two of the seven Washington-based governors have dissented. One official, Governor Adriana Kugler, was absent and didn’t vote.
Trump argues that because the U.S. economy is doing well, rates should be lowered. But unlike a blue-chip company that usually pays lower rates than a troubled start-up, the Fed adjusts rates to either slow or speed growth and would be more likely to keep them high if the economy is strong to prevent an inflationary outbreak.
Earlier Wednesday, the government said the economy expanded at a healthy 3% annual rate in the second quarter, though that figure followed a negative reading for the first three months of the year, when the economy shrank 0.5% at an annual rate. Most economists averaged the two figures to get a growth rate of about 1.2% for the first half of this year
When the Fed cuts its rate, it often – but not always – results in lower borrowing costs for mortgages, auto loans and credit cards.
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