{"id":48019,"date":"2025-07-30T17:13:07","date_gmt":"2025-07-30T17:13:07","guid":{"rendered":"https:\/\/www.newsbeep.com\/us\/48019\/"},"modified":"2025-07-30T17:13:07","modified_gmt":"2025-07-30T17:13:07","slug":"fed-unlikely-to-cut-benchmark-interest-rates-though-economic-policy-schism-emerges","status":"publish","type":"post","link":"https:\/\/www.newsbeep.com\/us\/48019\/","title":{"rendered":"Fed unlikely to cut benchmark interest rates, though economic policy schism emerges"},"content":{"rendered":"

WASHINGTON (AP) \u2014 Two top Federal Reserve officials could dissent from the central bank\u2019s likely decision Wednesday to hold its key interest rate steady<\/a>, a sign of division at the Fed that reflects the economy\u2019s muddy outlook and possibly the jockeying to replace Chair Jerome Powell when his term ends in May 2026. <\/p>\n

Based on their public comments<\/a> in the past two months, it\u2019s possible that governors Christopher Waller and Michelle Bowman could vote against leaving the short-term rate at about 4.3%. If so, it would be the first time two of the seven governors at the Fed have dissented in over three decades. <\/p>\n

The division could be a preview of what might happen after Powell steps down, if President Donald Trump appoints a replacement who pushes for the much lower interest rates the White House desires. Other Fed officials could push back if a future chair sought to cut rates by more than economic conditions would otherwise support. <\/p>\n

On Wednesday, Trump seized on a report showing the economy expanded at a 3% annual rate<\/a> in the second quarter as evidence that growth is accelerating and called on Powell to cut rates. Yet the Fed typically reduces borrowing costs when the economy is faltering and threatening to send unemployment higher. <\/p>\n

The economy isn\u2019t necessarily doing as well as the 3% figure suggests. It follows a negative reading in the first three months of the year, when the economy shrank at a 0.5%<\/a> annual rate. Most economists are averaging the two figures to get a growth rate of about 1.25% for the first half of the year. If that sluggishness continues, the Fed could cut rates as early as September.<\/p>\n

For now, any dissent also would likely reflect that there are at least two different ways to see the U.S. economy, which is clearly in flux. The first is the way that most Fed officials have described it: Unemployment is at a low 4.1%<\/a>, while the economy is growing, albeit modestly, and inflation did tick up in June<\/a>, largely because of tariffs. <\/p>\n

So, the thinking goes, why not stand pat on rates and see what happens next? If inflation continues to heat up, a rate cut could make things worse \u2014 the Fed typically raises borrowing costs to combat inflation. And as long as the economy is doing well, there is no need to cut to support growth. <\/p>\n

The other view is more worrisome: There are signs the economy is weakening, such as sluggish hiring<\/a>, slower consumer spending<\/a>, and pretty modest overall growth. The economy, in the first six months of the year, probably expanded at an annual rate of about 1.5%. At the same time, tariffs have lifted inflation by less than many economists had feared, so far. <\/p>\n

This is the view of the economy that Waller sketched out in a speech<\/a> earlier this month. <\/p>\n

\u201cPrivate-sector payroll growth is near stall speed,\u201d Waller said. \u201cWe should not wait until the labor market deteriorates before we cut the policy rate.\u201d <\/p>\n

When the Fed cuts its rate, it often \u2014 but not always<\/a> \u2014 results in lower borrowing costs for mortgages, auto loans and credit cards. <\/p>\n

Some economists agree with Waller\u2019s concerns about the job market. Excluding government hiring, the economy added just 74,000 jobs in June, with most of those gains occurring in health care. <\/p>\n

\u201cWe are in a much slower job hiring backdrop than most people appreciate,\u201d said Tom Porcelli, chief U.S. economist at PGIM Fixed Income.<\/p>\n

Waller was appointed to the Fed\u2019s seven-member governing board by Trump during the president\u2019s first term. He has often been mentioned as a potential replacement for Powell. Waller has underscored in several speeches that he does not think Trump\u2019s tariffs will lead to persistently higher inflation. <\/p>\n

Bowman, the vice chair for regulation, was also appointed during Trump\u2019s first term. She suggested in June<\/a> that the Fed should soon reduce borrowing costs. Bowman is also a possible Powell replacement, though more of a long shot. <\/p>\n

Michael Feroli, an economist at JPMorgan Chase, said in a note to clients this week if the pair were to dissent, \u201cit would say more about auditioning for the Fed chair appointment than about economic conditions.\u201d <\/p>\n

The Fed\u2019s two-day meeting comes after a week of extraordinary interactions<\/a> with the Trump White House, which has accused Powell of mismanaging an extensive, $2.5 billion renovation of two office buildings. Trump suggested two weeks ago that the rising cost for the project could be a \u201cfiring offense\u201d but has since backed off that characterization. <\/p>\n

Notably, Trump argues that the Fed should cut because the economy is doing very well, which is a different viewpoint than nearly all economists, who say that a healthy, growing economy doesn\u2019t need rate cuts. <\/p>\n

\u201cIf your economy is hot, you\u2019re supposed to have higher short-term rates,\u201d Porcelli said. <\/p>\n","protected":false},"excerpt":{"rendered":"WASHINGTON (AP) \u2014 Two top Federal Reserve officials could dissent from the central bank\u2019s likely decision Wednesday to…\n","protected":false},"author":2,"featured_media":48020,"comment_status":"","ping_status":"","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[27],"tags":[1927,28,12,8876,101,8877,1904,793,3132,2938,1534,37513,35936,37514,795],"class_list":["post-48019","post","type-post","status-publish","format-standard","has-post-thumbnail","category-business","tag-ap-top-news","tag-business","tag-donald-trump","tag-economic-indicators","tag-economy","tag-federal-reserve-system","tag-financial-services","tag-general-news","tag-government-regulations","tag-jerome-powell","tag-jpmorgan-chase-co","tag-michael-feroli","tag-michelle-bowman","tag-tom-porcelli","tag-u-s-news"],"_links":{"self":[{"href":"https:\/\/www.newsbeep.com\/us\/wp-json\/wp\/v2\/posts\/48019","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.newsbeep.com\/us\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.newsbeep.com\/us\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.newsbeep.com\/us\/wp-json\/wp\/v2\/users\/2"}],"replies":[{"embeddable":true,"href":"https:\/\/www.newsbeep.com\/us\/wp-json\/wp\/v2\/comments?post=48019"}],"version-history":[{"count":0,"href":"https:\/\/www.newsbeep.com\/us\/wp-json\/wp\/v2\/posts\/48019\/revisions"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/www.newsbeep.com\/us\/wp-json\/wp\/v2\/media\/48020"}],"wp:attachment":[{"href":"https:\/\/www.newsbeep.com\/us\/wp-json\/wp\/v2\/media?parent=48019"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.newsbeep.com\/us\/wp-json\/wp\/v2\/categories?post=48019"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.newsbeep.com\/us\/wp-json\/wp\/v2\/tags?post=48019"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}