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What signals were released by the Federal Reserve's first two dissenting votes in nearly 32 years?

BlockBeatsJul 31, 2025
#Macro
At 02:00 AM Beijing time on Thursday, the Federal Reserve held interest rates steady for the fifth time, keeping the benchmark interest rate target range at 4.25%-4.50%, in line with market expectations. The Fed's decision was made against the backdrop of strong political pressure from the White House on Chairman Powell to cut interest rates. The Federal Reserve is keeping its benchmark policy rate in a range of 4.25% to 4.5% while weighing how importers, retailers and consumers will share the costs of higher tariffs. The outcome of the fierce debate over who will bear the burden of tariffs may determine the direction of inflation and employment later this year, and may determine whether and when the central bank resumes cutting interest rates in the coming months. The Fed made few changes to its policy statement, signaling that it currently has no intention of signaling any imminent rate cuts. The decision to hold interest rates steady was met with rare opposition from two officials, with Fed Governors Waller and Bowman calling for an immediate 25 basis point cut. This is the first time since 2020 that more than one Fed official has voted against Powell's decision at a meeting, and the first time since 1993 that two board members have disagreed. Fed Governor Waller said two weeks ago that he supported a rate cut, which is in line with his potential nomination to succeed Powell as Fed chairman next spring. Earlier this month, he expressed concern that maintaining excessively high interest rates was too high for an economy lacking the impetus to push up inflation - a view also supported by some economists and former Fed officials. Fed Governor Bowman, previously a staunch representative of the hawkish stance, opposed the first rate cut that began last September, and her shift is remarkable. Powell and his colleagues are studying how tariffs are reflected in inflation data, and there is widespread concern that rising commodity prices could keep inflation above the Fed's 2% target for the fifth consecutive year. While inflation has clearly fallen from its 2021-2023 highs, and there has been no recession as many economists predicted, Fed officials remain highly wary of cutting rates too soon and reigniting price pressures. Many businesses stockpiled inventory before the tariffs took effect, and have been reluctant to raise prices for fear of losing inflation-crushed consumers. But some economists warn that as lower-margin businesses run out of pre-tariff inventory and face higher costs, they may become increasingly inclined to pass those costs on to consumers. Richard Clarida, a Trump appointee who served as Powell's deputy, said: Powell has a lot on his plate right now, but one thing he has said, and his critics have not fully appreciated, is that tariffs are indeed reflected in some price indices. The reason inflation pressures have not spiraled out of control is because service prices have remained stable. Economic data released earlier on Wednesday sent mixed signals, explaining the Fed's caution. While second-quarter GDP growth reached 3.0%, exceeding expectations, measures of private business and consumer demand slowed to 1.2% from 1.9% in the previous quarter, well below the 2.9% at the end of last year. Economists attributed the decline to slower job growth and the impact of tariffs. Other recent data show that consumer spending may have stabilized before rising import costs are reflected in retail prices. However, the Trump administration believes that, in the long run, tariffs will make the United States richer by promoting high-paying manufacturing jobs. The Fed is caught in a "two steps forward, one step back" cycle in understanding the Trump administration's economic policies. Trade agreements recently reached by the United States with Japan and the European Union set tariff levels at 15%, lower than Trump's threatening rhetoric in April this year, but still higher than market expectations at the beginning of the year. Trump's unpredictability also leaves the possibility of further tariff increases, as well as the risk that judicial challenges could overturn the tariffs. On the fiscal front, Trump signed a major tax cut bill this month. Some Republican lawmakers are discussing rebates to consumers, which could provide new stimulus to an economy that the Fed believes is close to full employment. If the labor market therefore continues to remain stable, Fed officials may regret cutting rates too soon. Investors currently expect the Fed to cut rates at its September meeting with about a two-thirds probability, but that depends on whether the impact of tariffs on inflation remains contained and whether there are more signs of weakness in the labor market. In the coming months, divisions within the Fed are likely to focus on whether tariffs are damaging the economy faster than they are pushing up inflation, and whether acting rashly before it is clear could lead to policy misjudgments. One view is that current interest rate levels are already above the range appropriate to the actual state of the economy, and that there is insufficient underlying pressure on inflation, and that if job growth stalls, the Fed will confirm the White House's and others' criticism that it is "behind the curve." But another view is that cutting rates as tariff pressures intensify this summer, or as fiscal stimulus and financial market activity combine to bring unexpected heat to the economy, may be premature. If the data takes a clear direction before September, the decision may be relatively easy: if inflation is stubborn and economic growth is strong, rate cuts can be delayed; if the economy weakens significantly, there is reason to cut rates. But if the current state of ambiguity persists, Powell will have to face an even tougher choice. Richard Clarida, a Trump appointee who served as Powell's deputy, said: If the data continues to evolve at its current pace, it will become very tricky - not enough to cut rates without a doubt, and not good enough to declare victory. Therefore, it is more likely than some people think that Powell will simply stand pat and keep interest rates unchanged at all six of his remaining policy meetings. https://xnews.jin10.com/details/185851 [Jin10 Data]
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What signals were released by the Federal Reserve's first two dissenting votes in nearly 32 years?

BlockBeatsJul 31, 2025
#Macro
At 02:00 AM Beijing time on Thursday, the Federal Reserve held interest rates steady for the fifth time, keeping the benchmark interest rate target range at 4.25%-4.50%, in line with market expectations. The Fed's decision was made against the backdrop of strong political pressure from the White House on Chairman Powell to cut interest rates. The Federal Reserve is keeping its benchmark policy rate in a range of 4.25% to 4.5% while weighing how importers, retailers and consumers will share the costs of higher tariffs. The outcome of the fierce debate over who will bear the burden of tariffs may determine the direction of inflation and employment later this year, and may determine whether and when the central bank resumes cutting interest rates in the coming months. The Fed made few changes to its policy statement, signaling that it currently has no intention of signaling any imminent rate cuts. The decision to hold interest rates steady was met with rare opposition from two officials, with Fed Governors Waller and Bowman calling for an immediate 25 basis point cut. This is the first time since 2020 that more than one Fed official has voted against Powell's decision at a meeting, and the first time since 1993 that two board members have disagreed. Fed Governor Waller said two weeks ago that he supported a rate cut, which is in line with his potential nomination to succeed Powell as Fed chairman next spring. Earlier this month, he expressed concern that maintaining excessively high interest rates was too high for an economy lacking the impetus to push up inflation - a view also supported by some economists and former Fed officials. Fed Governor Bowman, previously a staunch representative of the hawkish stance, opposed the first rate cut that began last September, and her shift is remarkable. Powell and his colleagues are studying how tariffs are reflected in inflation data, and there is widespread concern that rising commodity prices could keep inflation above the Fed's 2% target for the fifth consecutive year. While inflation has clearly fallen from its 2021-2023 highs, and there has been no recession as many economists predicted, Fed officials remain highly wary of cutting rates too soon and reigniting price pressures. Many businesses stockpiled inventory before the tariffs took effect, and have been reluctant to raise prices for fear of losing inflation-crushed consumers. But some economists warn that as lower-margin businesses run out of pre-tariff inventory and face higher costs, they may become increasingly inclined to pass those costs on to consumers. Richard Clarida, a Trump appointee who served as Powell's deputy, said: Powell has a lot on his plate right now, but one thing he has said, and his critics have not fully appreciated, is that tariffs are indeed reflected in some price indices. The reason inflation pressures have not spiraled out of control is because service prices have remained stable. Economic data released earlier on Wednesday sent mixed signals, explaining the Fed's caution. While second-quarter GDP growth reached 3.0%, exceeding expectations, measures of private business and consumer demand slowed to 1.2% from 1.9% in the previous quarter, well below the 2.9% at the end of last year. Economists attributed the decline to slower job growth and the impact of tariffs. Other recent data show that consumer spending may have stabilized before rising import costs are reflected in retail prices. However, the Trump administration believes that, in the long run, tariffs will make the United States richer by promoting high-paying manufacturing jobs. The Fed is caught in a "two steps forward, one step back" cycle in understanding the Trump administration's economic policies. Trade agreements recently reached by the United States with Japan and the European Union set tariff levels at 15%, lower than Trump's threatening rhetoric in April this year, but still higher than market expectations at the beginning of the year. Trump's unpredictability also leaves the possibility of further tariff increases, as well as the risk that judicial challenges could overturn the tariffs. On the fiscal front, Trump signed a major tax cut bill this month. Some Republican lawmakers are discussing rebates to consumers, which could provide new stimulus to an economy that the Fed believes is close to full employment. If the labor market therefore continues to remain stable, Fed officials may regret cutting rates too soon. Investors currently expect the Fed to cut rates at its September meeting with about a two-thirds probability, but that depends on whether the impact of tariffs on inflation remains contained and whether there are more signs of weakness in the labor market. In the coming months, divisions within the Fed are likely to focus on whether tariffs are damaging the economy faster than they are pushing up inflation, and whether acting rashly before it is clear could lead to policy misjudgments. One view is that current interest rate levels are already above the range appropriate to the actual state of the economy, and that there is insufficient underlying pressure on inflation, and that if job growth stalls, the Fed will confirm the White House's and others' criticism that it is "behind the curve." But another view is that cutting rates as tariff pressures intensify this summer, or as fiscal stimulus and financial market activity combine to bring unexpected heat to the economy, may be premature. If the data takes a clear direction before September, the decision may be relatively easy: if inflation is stubborn and economic growth is strong, rate cuts can be delayed; if the economy weakens significantly, there is reason to cut rates. But if the current state of ambiguity persists, Powell will have to face an even tougher choice. Richard Clarida, a Trump appointee who served as Powell's deputy, said: If the data continues to evolve at its current pace, it will become very tricky - not enough to cut rates without a doubt, and not good enough to declare victory. Therefore, it is more likely than some people think that Powell will simply stand pat and keep interest rates unchanged at all six of his remaining policy meetings. https://xnews.jin10.com/details/185851 [Jin10 Data]
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