Fed leaves rates unchanged against two governors' advice

The US Federal Reserve (Fed) unsurprisingly left interest rates unchanged on Wednesday for the fifth time in a row, a decision marked by rare opposition from two governors who had wanted a cut.

At a press conference, Federal Reserve Chairman Jerome Powell said the institution could still afford to wait to learn more about the trajectory of the US economy before moving its rates. He stressed that there remain "many, many uncertainties to resolve" regarding the impact of the barrage of new tariffs imposed on products entering the United States by the Trump administration.

The Fed's key rates - which guide the cost of credit and have a strong impact on the markets - therefore remain at the level they have been since December, between 4.25% and 4.50%.

Investors had largely anticipated this status quo, but Jerome Powell's comments led them to believe that a rate cut would not occur at the institution's next meeting in September.

On Wall Street, indices—which had been trading generally positive since the opening of the New York Stock Exchange—turned around. At around 7:20 p.m. GMT, the Dow Jones Industrial Average was down 0.71%, the Nasdaq index was down 0.17%, and the broader S&P 500 index was down 0.45%. The dollar, meanwhile, gained more than 1% against the euro.

Of the twelve members of the Federal Open Market Committee (FOMC), two voted against holding rates steady. Such opposition had not been seen in more than 30 years.

Michelle Bowman and Christopher Waller argued for a quarter-point cut, according to the Fed's statement. These two governors were propelled into their positions during Donald Trump's first term in the White House.

Michelle Bowman was recently appointed, at the President's initiative, as the Fed's vice chair in charge of banking supervision. Christopher Waller is seen as a possible successor to Jerome Powell, who has been continually criticized by President Trump.

Governor Waller had publicly stated that he wanted a rate cut, fearing that the US job market would deteriorate too sharply. His colleague had also said that she was leaning in that direction, but less firmly on the surface.

Asked about the disagreements, Powell said that each FOMC member had expressed their views "very carefully" during a "good meeting," and that it was "not surprising" to have divergent views given the context.

Analysts noted that the last time two governors (and not just voting FOMC members) opposed a decision at the same meeting was in 1993.

The Fed expects the new tariffs, the details of which change almost daily, to result in slower economic growth, with higher inflation and higher unemployment. It noted in its statement that US growth "slowed in the first half of the year," but that the labor market remains "solid," with a "low" unemployment rate.

At a press conference, Jerome Powell said the new tariffs had begun to push up the prices of some goods. "We're seeing the very beginning of the effects on the price of goods," which could be "more or less" high but will not be zero, he said.

On Wednesday morning, Donald Trump once again assured that there was "no inflation" and urged Jerome Powell to lower rates. Showcasing his growing impatience, he called the Fed chairman—whom he himself appointed to the position during his first term—a "moron," called on other central bankers to oust him, regularly made a show of wanting to eject him, and even paid a surprise visit last week to the renovation of the institution's headquarters in Washington, which he deemed too costly.

"It was an honor to receive him," said Jerome Powell on Wednesday, while once again defending the institution's independence in the name of the "general interest" and to prevent politicians "from influencing rates for electoral purposes, for example."