The US Federal Reserve left its benchmark interest rate unchanged on Wednesday, even amid intense pressure from Donald Trump to lower rates.
Despite an onslaught of attacks from the White House against the Fed, officials at the central bank said that economic “uncertainty” remains too high to lower rates.
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But two of the Fed’s governors voted against the decision – the first time that multiple governors have voted against the majority since 1993. Governors Christopher Waller and Michelle Bowman, both appointed by Trump, wanted rates to be lowered. Both have been floated as potential replacements for Fed chair Jerome Powell.
Data released on Wednesday underlined the resilience of the US economy, which bounced back faster than expected in the second quarter. US gross domestic product (GDP) grew at an annual rate of 3% in the second quarter of 2025, according to the latest official data, ahead of the average 2.5% forecast from economists.
This marked a significant acceleration from a 0.5% contraction in the first quarter, which was dragged down by a surge of imports as companies tried to get ahead of Trump’s tariffs. But the rebound was boosted by a 30% slump in imports.
Trump used the news to once again call for a rate cut and again insulted Powell, whom he has nicknamed “Too Late”. “2Q GDP JUST OUT: 3%, WAY BETTER THAN EXPECTED! ‘Too Late’ MUST NOW LOWER THE RATE. No Inflation! Let people buy, and refinance, their homes!” he wrote on Truth Social.
Speaking after the rate decision, Powell said that it was still unclear how tariffs would affect prices.
Chart of quarterly GDP
“Higher tariffs have begun to show through more clearly to prices of some goods, but their overall effects on economic activity and inflation remain to be seen,” Powell said.
It’s possible, he added, that tariffs cause just a one-time price increase. But he warned that inflation could be more persistent.
“What we see now is, basically, the very beginnings of whatever the effects turn out to be on goods inflation,” said Powell. “They may be less than people estimate or more than people estimate. They are not going to be zero. Consumers will pay some of this. Businesses will pay some of this. Retailers will pay some of this.”
The Fed’s federal open market committee (FOMC) has eight opportunities a year to change interest rates during its scheduled two-day meetings. While the FOMC decreased rates three times in the fall, bringing them down a full percentage point, it left rates unchanged after its last five meetings. Interest rates currently sit at a range of 4.25% to 4.5%.
Trump is partly to blame for the pause in rate cuts. Fed officials say that the economy has become too unstable to change rates. The Fed has to strike a delicate balance between its “dual mandate”, keeping both unemployment and inflation low. Though the economy was strong at the beginning of the year, Trump’s long slate of tariffs have started to creep into prices, bringing inflation up from 2.3% in April to 2.7% in June.
But that has not stopped the president from trying to bully Powell into lowering rates. Over the last few weeks, Trump and other members of his administration have zeroed in on building renovations taking place at the Fed’s headquarters in Washington, which have ballooned in costs over the years.
The Fed says costs have increased due to the nature of the renovations, which focus on two buildings that have not seen major renovations since the 1930s, but Trump has been trying to frame the renovations as extravagant waste.
Last week, the president donned a hard hat and made a rare visit to the Fed to make a point about the renovations. During remarks to the press, the typically composed Powell appeared visibly irritated as Trump criticized the renovations. During the brief spat, Trump claimed that the renovations cost $3.1bn, though an annoyed Powell pointed out that Trump was including the renovation of a different Fed office building that was completed five years ago.
When asked by reporters if he is still considering ousting Powell, Trump said he doesn’t “think it’s necessary”.
“I believe he’s going to do the right thing,” he said.
On Wednesday, Powell told reporters that it was overall “a good visit”.
“I will say we had a nice visit with the president. It was an honor to host him,” he said. “It’s not something that happens very often at the Federal Reserve to have the president come over, let alone to visit a building.”
