WASHINGTON DC – The Federal Reserve on Wednesday kept short-term interest rates at a level of 4.25 to 4.5 percent, but two board officials running to succeed Fed Chair Powell voted to lower them. Nine of members of the Federal Open Market Committee agreed to keep rates unchanged.
The two dissenters were Fed Vice Chair of Supervision Michelle Bowman and Governor Christopher Waller — whom are both in the running for President Trump’s nomination to replace Fed Chair Jerome Powell — voted to lower them following an immense pressure campaign from the president.
It was the first time two members of the Fed board, which usually votes unanimously, dissented in more than 30 years. All members of the Fed board are part of the FOMC, which also includes a rotation of regional reserve bank officials.
The continued interest rate pause was in line with expectations from financial markets, keeping rates where they have been since January. Interest rate futures contracts put the odds of a pause at 96.9 percent on Wednesday prior to the decision.
The hold-steady comes as prices have started to tick back upwards — likely a result of tariffs imposed as part of President Trump’s trade war. Auto makers announced last week that tariffs were driving prices higher.
The consumer price index (CPI) slid up in June to a 2.7 percent annual increase from 2.4 percent in May. The personal consumption expenditures (PCE) price index inched up to a 2.3 percent annual increase in May from 2.2 percent in April.
Economists have attributed the moves to businesses passing along cost increases coming from tariffs. Cost increases have shown up in electronics, home furnishings and apparel — all items that are sensitive to import taxes.
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