Powell said the Fed has made no decision on a September rate cut

Federal Reserve Chair Jerome Powell on Wednesday said the central bank has not made any decision about cutting interest rates at its September meeting, shutting down mounting speculation that a rate cut might be coming soon.

“We have made no decisions about September,” Powell told reporters during his press conference. “We don’t do that in advance. We’ll be taking that information into consideration and all the other information we get as we make our decision.” His comments were reported by Bloomberg.

That’s not what traders wanted to hear. Investors looking for clues were left empty-handed, and Wall Street reacted fast; stocks gave up gains and turned lower shortly after Powell’s statement. With just over a month until the next Fed meeting, Powell said the committee would be guided by two more rounds of inflation and jobs data before deciding on any policy move.

Bowman and Waller oppose the decision to keep rates unchanged

While the Fed chose to keep interest rates steady, two members of the board broke ranks and said no. That hasn’t happened in over 30 years. It was the first time in 259 straight meetings that more than one official dissented from the group decision. The two dissenters, Michelle Bowman and Christopher Waller, were also appointed during Donald Trump’s first term, just like Powell.

Bowman joined the Board of Governors in 2018 and was reappointed in early 2020. She had previously worked as a bank executive in Kansas and served as a state banking regulator before entering the Fed. Earlier this year, Trump nominated her to take over as vice chair for supervision after Michael Barr stepped down.

Waller came in later, in late 2020, just before Trump’s presidency ended. He’d worked at the St. Louis Fed since 2009 and before that had a long academic background. Both officials rejected the Fed’s decision to hold rates steady on Wednesday.

The dissent highlights internal tension in the Fed as it tries to steer policy while managing mixed signals from the economy. Powell defended the hold, saying the majority of the committee believes the current rate is not restraining growth too much. “It seems to me, and to almost the whole committee, that the economy is not performing as though restrictive policy is holding it back inappropriately,” he said.

Powell watches jobs, tariffs, and slowing growth ahead of September

Powell warned there’s “downside risk to the labor market” in the coming months, a change from earlier focus on inflation alone. He said this risk will be an important part of the Fed’s decision-making process moving forward. “We’ll receive a good amount of data that will help inform our assessment of the balance of risks in the appropriate setting of the federal funds rate,” he said.

He also addressed the impact of rising tariffs on prices, saying they’ve started to show up in goods costs. “Higher tariffs have begun to show through more clearly for prices on some goods,” Powell said. But he added that their overall impact on economic activity and inflation is still unclear. According to him, the effect might be temporary, but it’s also possible that the inflation it causes could “be more persistent.”

Looking at the broader economy, Powell said there’s been a slowdown in growth during the first half of the year. “The moderation in growth largely reflects a slowdown in consumer spending,” he said. But he pointed to swings in net exports as a reason not to overreact to recent figures. “Focusing on the first half of the year helps smooth through the volatility in the quarterly figures related to the unusual swings in net exports,” he said.

Despite these concerns, Powell said the Fed is in a good spot to respond quickly if conditions change. “We believe that the current stance of monetary policy leaves us well positioned to respond in a timely way to potential economic developments.”

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