Facebook<\/p>\n
Tweet<\/p>\n
<\/p>\n Email Link<\/p>\n Washington \n For the past 32 years, the Federal Reserve\u2019s decisions on interest rates have almost always been unanimous, with the occasional dissent from a lone policymaker. That might not be the case this week.\n <\/p>\n \n The Fed is expected to keep rates on hold at the conclusion of its two-day policy meeting on Wednesday \u2014 its fifth consecutive pause \u2014 but it could draw dissents from two members of the central bank\u2019s Board of Governors: Fed Governor Christopher Waller and Fed Vice Chair for Supervision Michelle Bowman.\n <\/p>\n \n If Waller and Bowman dissent, as many analysts expect, it would be the first time two Fed governors have simultaneously done so since 1993<\/a>. Waller and Bowman have said publicly that the Fed should put aside its concerns that President Donald Trump\u2019s tariffs could boost inflation, and the central bank should resume rate cuts this month to keep the labor market intact.\n <\/p>\n \n \u201cWe should not wait until the labor market deteriorates before we cut the policy rate,\u201d Waller said on July 17<\/a> at an event in New York, adding that officials \u201cshould look through tariff effects and focus on underlying inflation, which seems to be close to the (Fed\u2019s) 2% goal.\u201d\n <\/p>\n \n The division among policymakers illustrates the extraordinary and uncomfortable moment the Fed is in: waiting for clarity on how Trump\u2019s trade war is affecting the US economy while enduring unrelenting pressure from the White House to lower rates.\n <\/p>\n \n Fed Chair Jerome Powell has been attacked repeatedly by Trump and his allies for months because central bankers have held off lowering rates so far this year to see how Trump\u2019s policies affect the US economy. He is set to take questions from reporters on the central bank\u2019s latest decision at 2:30 p.m. ET.\n <\/p>\n \n So far, the impact of Trump\u2019s tariffs on inflation has been limited<\/a> and the labor market has continued to chug along<\/a>.\n <\/p>\n \n Inflation has remained tame largely because of strategic decisions businesses have made to steer through Trump\u2019s ever-evolving trade war, economists say.\n <\/p>\n \n \u201cThey\u2019re holding off on raising prices for as long as they can because the tariffs could change and there was also this front-loading of imports in the first quarter, so some companies have these less expensive inventories they\u2019re still drawing from,\u201d said Veronica Clark, an economist at Citigroup. She added that some businesses have also chosen to absorb higher costs instead of jacking up consumer prices.\n <\/p>\n \n Businesses are indeed employing various strategies<\/a> to deal with Trump\u2019s tariffs, but one of them isn\u2019t shedding workers. Unemployment stood at a low 4.1% in June and new applications for unemployment benefits remain relatively low, according to Labor Department data.\n <\/p>\n \n Overall, the job market remains in decent shape, for now, but that also means most Fed committee members have said there isn\u2019t any urgency to step in with a rate cut to stimulate the economy. In addition to fighting inflation, the Fed is also responsible for maintaining the labor market\u2019s strength.\n <\/p>\n \n \u201cWe\u2019re going to see an orderly slowdown in the second half of the year precisely because we\u2019re not seeing anything super concerning in the labor market,\u201d said Sarah Wolfe, senior economist at Morgan Stanley Wealth Management. \u201cBut we\u2019re looking at companies\u2019 (earnings call) transcripts to see if they\u2019re looking towards layoffs.\u201d\n <\/p>\n \n Wednesday\u2019s decision probably won\u2019t sit well with Trump.\n <\/p>\n \n The president continues to call for supersized rate cuts, saying that the Fed not lowering rates is forcing the federal government to make massive interest payments on its debt. (The Fed doesn\u2019t consider the government\u2019s finances when setting rates.)\n <\/p>\n \n Earlier this month, the Trump administration seized on the Fed\u2019s $2.5 billion renovation of its headquarters in Washington, DC to pile more pressure on Powell to lower borrowing costs. Trump backed off from his criticism<\/a> of the Fed\u2019s management of the project after touring the renovation site last week.\n <\/p>\n
\n <\/a><\/p>\n
\n \u00a0\u2014\u00a0<\/p>\n