The US Federal Reserve held interest rates steady on Wednesday, despite growing divisions within its ranks and pressure from President Donald Trump to lower borrowing costs.
The central bank had previously appeared united on its wait-and-see approach citing economic uncertainty caused by Trump’s trade war — but for the first time in 30 years, two sitting governors, both appointed by Trump, cast dissenting votes. Their break comes as Trump, pointing to the economy’s resilience, has persistently criticized Fed Chair Jerome Powell for not cutting rates to as low as 1%.
New economic data this week suggests that the US economy so far appears to have avoided significant tariff-related inflation. The Fed faces a difficult balancing act, caught between the choice of cutting rates too soon with the risk of reigniting inflation, or “maintaining a policy stance that may be tighter than necessary,” The Wall Street Journal wrote.
But economists warned the inflation threat remains, with sweeping new duties of up to 50% on various countries set to take effect Friday if trade deals are not reached.