Fed Leaves Rates Unchanged Despite Trump's Pressure, with Two Governors Dissenting

• The U.S. central bank held interest rates steady on Wednesday, and Federal Reserve Chair Jerome Powell's comments after the decision undercut confidence that borrowing costs would begin to fall in September, possibly stoking the ire of President Donald Trump, who has demanded immediate and steep rate relief.
• Powell said the Fed is focused on controlling inflation - not on government borrowing or home mortgage costs that Trump wants lowered - and added that the risk of rising price pressures from the administration's trade and other policies remains too high for the central bank to begin loosening its grip until more information is collected.
• While there will be two full months of data before the Fed's September 16-17 meeting, Powell said the Fed was still in the early stages of understanding how Trump's rewrite of import taxes and other policy changes will unfold in terms of inflation, jobs and economic growth.
• The latest policy decision was made after a 9-2 vote by the rate-setting Federal Open Market Committee, which passes for a split outcome at the consensus-driven central bank, with two Fed governors dissenting for the first time in more than 30 years.
• Along with Powell's comments, the Fed's new policy statement also gave little hint that rates were likely to fall soon. "The unemployment rate remains low, and labour market conditions remain solid. Inflation remains somewhat elevated," the central bank said after voting to keep the benchmark overnight interest rate steady in the 4.25%-4.50% range for the fifth consecutive meeting.
• The statement noted that economic growth "moderated in the first half of the year," possibly bolstering the case to lower rates at a future meeting should that trend continue. But it also said "uncertainty about the economic outlook remains elevated," with risks to both the Fed's inflation and employment goals, language that has anchored its reluctance to cut rates until the path of inflation and jobs becomes clearer.
• Powell was careful to keep his options open on monetary policy. "We have made no decisions about September" and have time to take in a wide range of data before the central bank next meets in mid-September, he said. Powell noted that current monetary policy is appropriately set at "modestly restrictive" levels, as some risks to the outlook have risen.

(Source: Reuters)