PinnedUpdated July 30, 2025, 3:31 p.m. ETThe Federal Reserve held interest rates steady on Wednesday for a fifth meeting in a row, despite officials splintering over the right time to restart cuts after an extended pause.In standing pat, the central bank kept interest rates at a range of 4.25 percent to 4.5 percent, a level reached in December after a series of reductions at the end of last year. Two members of the powerful Board of Governors dissenting. Christopher J. Waller, a governor, and Michelle W. Bowman, vice chair for supervision — both of whom were appointed by President Trump — supported the Fed lowering interest rates by a quarter of a percentage point.Here’s what to know about the decision:The decision to hold interest rates steady was widely anticipated but it also was one of the most contentious decisions in decades, with two members of the board dissenting. The last time policymakers of that stature opposed a vote on monetary policy was back in 1993.Fed Chair Jerome H. Powell was repeatedly asked about the prospects of a September rate cut. He did not take a reduction at that time off the table but made clear that the central bank had not yet made a decision about what to do. He stressed that economic data to be released between now and the mid-September meeting would be crucial.A big question for the Fed is whether higher consumer prices stemming from tariffs will lead to a persistent inflation problem. Mr. Powell backed the idea that such levies were likely to lead to only a one-off price increase. Still, he stressed that keeping interest rates at a level that is high enough to keep some restraint on the economy is important, given that inflation is still above the Fed’s 2 percent target.One of the biggest issues dividing the Fed is the health of the labor market. The two policymakers who dissented have expressed much more concern about weakness on that front than other officials. Mr. Powell on Wednesday described the labor market as “solid,” but noted that there were “downside risks.”July 30, 2025, 3:25 p.m. ETFederal Reserve policymakers have stressed that their decisions on interest rates in coming months will depend on what happens in the economic data.Just one problem: That data may be becoming less reliable.The Bureau of Labor Statistics last month said it was reducing its collection of data on consumer prices, and had stopped gathering data entirely in several areas. On Tuesday, the agency provided more details on the cutbacks and indicated they were more significant than previously understood.Collecting the data that goes into the Consumer Price Index is a labor-intensive operation. Every month, a small army of government workers visits stores and other businesses across the country to check prices of eggs, underwear, haircuts and tens of thousands of other goods and services. The data collected is the basis for the inflation measures that Fed policymakers rely on when setting interest rates, and that determine cost-of-living increases in union contracts and Social Security benefits, among other uses.In its announcement on Tuesday, the Bureau of Labor Statistics said that in addition to suspending data collection in three cities, it had also reduced the amount of data it was collecting in the rest of the country by about 15 percent on average. The cuts affected data on consumer products and on rents, both crucial information for policymakers.“The main takeaway for me is that their data collection problems were much worse than we thought,” Omair Sharif, founder of Inflation Insights, a forecasting firm, wrote in a note to clients on Wednesday.When the government can’t collect data on prices, it has to fill in the gaps with a statistical technique called “imputation.” The more data that must be imputed, the less reliable the overall numbers become.The bureau, which is part of the Labor Department, hasn’t provided a detailed explanation for the cuts, but has said it “makes reductions when current resources can no longer support the collection effort.” The agency recently announced it would stop publishing some data on wholesale prices, also because of resource constraints.Economists have become increasingly concerned about the federal statistical system in recent years. Response rates to government surveys have fallen steadily, gradually eroding the reliability of statistics based on that data. The agencies have been working to develop new techniques that rely less on surveys, but have been hampered by shrinking budgets.Those concerns predate the current administration, but have grown worse since President Trump returned to office. The Bureau of Labor Statistics and other federal statistical agencies have struggled with staff attrition as a result of the president’s freeze on federal hiring, combined with the buyouts he offered early in his term. The president’s budget also proposed further cuts to the bureau’s funding.Asked about the cuts on Wednesday, Jerome H. Powell, the Fed chair, said policymakers were “getting the data that we need to do our jobs.” But he stressed the importance of the federal statistical agencies.“The government data is really the gold standard in data,” he said. “We need it to be good and to be able to rely on it.”The bureau, in its announcement, indicated that the cutbacks have had only a minimal impact on the overall inflation numbers. A statistical analysis conducted by the agency found that suspending data collection in the three cities changed annual inflation estimates by less than one one-hundredth of a percentage point on average. The effects weren’t consistently in one direction; the cuts were more or less equally likely to push estimated inflation up and down.But that analysis didn’t examine the impact of the broader cutbacks in data collection, Mr. Sharif noted. He called the agency’s study “extremely limited.”“If that was meant to make us feel better about the quality of the C.P.I., it didn’t help,” he wrote.July 30, 2025, 3:18 p.m. ETThe last question was about whether Powell was planning to stay on as a governor after his term as chair ends in May. He responded succinctly: “I do not have any update for you.”July 30, 2025, 3:18 p.m. ETAnd then promptly exited the room.July 30, 2025, 3:14 p.m. ETTraders are pricing in a slightly lower chance of a quarter-point cut in September – 47 percent odds, down from 56 percent before the Fed’s announcement and Powell’s comments, according to CME FedWatch.July 30, 2025, 3:11 p.m. ETPowell said that this meeting was “one of the better” ones given the active debate around the table about the state of the economy and what to do about interest rates.July 30, 2025, 3:06 p.m. ETStocks have now given up their gains for the day and continue to fall, with the S&P 500 down roughly 0.5 percent. The tech-heavy Nasdaq is 0.3 percent lower. Investors are parsing through Powell’s comments, as he reiterates that the Fed is still monitoring the impact of tariffs on economic activity.July 30, 2025, 3:05 p.m. ETThe issue of independence has been center stage given Trump’s attacks on the central bank. Powell says it allows the Fed to make tough decisions on policy that are economically beneficial.July 30, 2025, 3:03 p.m. ETPowell, asked about the president’s attacks on the Fed, says that having an independent central bank has “served the public well.”July 30, 2025, 3:02 p.m. ETPowell really does not want to send a signal on September, even though he has not outright ruled it out. He has consistently talked about needing to look at the data that is set to come out between now and then. He has said that the Fed’s expectation is for inflation caused by tariffs to be a one-off phenomenon, suggesting the central bank may be able to cut even as price pressures intensify as expected in the coming months.July 30, 2025, 3:01 p.m. ETAsked about what the Fed needs to see to cut again, Powell said we have “risks to both of our goals” and the central bank would be looking at the “totality of the data.”July 30, 2025, 2:58 p.m. ETIn a sign that once the Fed restarts rate cuts it is unlikely to lower borrowing costs significantly, Powell said that after the central bank starts cutting, it will be shifting towards “neutral.” That is a level that does not stimulate the economy nor restrain it either. At no point has it talked about easing policy so that it revs up growth.July 30, 2025, 2:53 p.m. ETMy colleague Sydney Ember had a great story the other day exploring how one company is grappling with whether and when to pass on the cost of tariffs. For many businesses, it isn’t an easy decision.July 30, 2025, 2:58 p.m. ETMany companies, especially smaller independent businesses, are not only grappling with whether to pass on the extra costs to consumers, but also whether to tie any increases directly to the tariff policy. Part of their calculation has to do with potential political fallout: In this charged political environment, some businesses worry that increasing prices, and linking that to tariffs, will appear as if they are criticizing the president.July 30, 2025, 2:52 p.m. ETPowell said he was “pleased” that the president said he wanted the Fed to complete the renovation project.July 30, 2025, 2:52 p.m. ETPowell says it’s “not for me to say” if the controversy over the cost of the Fed’s renovation is part of a push to get the central bank to lower interest rates. He said that Trump’s trip to the renovation site was good visit.July 30, 2025, 2:52 p.m. ETPowell is asked about the renovations underway at the Fed’s headquarters and whether he sees the administration’s criticism of the project as a way to push the Fed to lower borrowing costs. He demurs on the question and says “We had a nice visit with the president. It was an honor to host him.”July 30, 2025, 2:51 p.m. ETPresident Trump frequently demands that the Fed lower interest rates to make it cheaper for the government to service its debts. But Powell on Wednesday said that this wasn’t the concern of the central bank, which does not “consider the costs to the government of our rate changes.”July 30, 2025, 2:50 p.m. ETAddressing whether tariffs are starting to impact prices that consumers pay, Powell says that evidence suggests that suppliers are only shouldering a small part of the cost burden, with companies including retailers bearing the brunt of the additional costs so far. But he also notes that tariffs are “starting to show up in consumer prices” as well.July 30, 2025, 2:49 p.m. ETPowell says that he still expects tariffs to flow through to consumer prices, but that the process maybe “slower than expected at the beginning.” And he says that some companies may be finding it hard to fully pass on tariff costs because consumers are unwilling or unable to pay higher prices.July 30, 2025, 2:48 p.m. ETPowell downplayed the two dissents to this meeting’s decision to hold rates steady, saying there was a good discussion of views around the table.July 30, 2025, 2:47 p.m. ETPowell declines to endorse projections that were released in June that showed the bulk of officials supported two quarter-point cuts this year.July 30, 2025, 2:46 p.m. ETPowell has referred a couple times to PDFP or “private domestic final purchases.” That is a measure of economic output after stripping out the effects of trade, inventories and government spending. Many economists view it as a more reliable measure of underlying private-sector demand.July 30, 2025, 2:47 p.m. ETThat measure showed demand slowing sharply in the first quarter, and falling further in the second.July 30, 2025, 2:43 p.m. ETPowell says there is downside risk in the labor market even though right now it appears to be in balance. “Downside risks to the labor market are certainly apparent,” he says.July 30, 2025, 2:40 p.m. ETOn tariffs, Powell says it is a “very dynamic time for trade negotiations, but we are still aways away from seeing where things settle down.”July 30, 2025, 2:43 p.m. ET“Very dynamic time” is certainly one way to put it.July 30, 2025, 2:38 p.m. ETPowell is asked directly about September and says the Fed has made no decision about cutting then.July 30, 2025, 2:46 p.m. ET“We have made no decisions about September,” he said.July 30, 2025, 2:07 p.m. ETNumber of governor dissents per year under each of the following chairsSource: Federal Reserve Bank of St. LouisNote: Includes dissenting votes on federal funds rate decisions.By Christine ZhangIn recent decades, the Federal Reserve board has been near-unanimous in its rate-setting decisions. Even a single dissent from a Fed governor has been rare.This week, there were two.Christopher J. Waller and Michelle Bowman, both Trump appointees, voted on Wednesday against the central bank’s decision to leave interest rates unchanged — the first time two governors have dissented in a single meeting since 1993.Their dissents come at a time of heightened pressure for the Fed and its current chair, Jerome H. Powell, who has faced repeated attacks from President Trump, including demands to either lower rates or resign.The Fed’s rate-setting committee has 12 voting members: the board, which consists of the seven governors, including the chair, plus five regional presidents. (Presidents, who are not included in these figures, dissent more frequently. Adriana Kugler, a governor, did not attend the meeting and therefore did not cast a vote.)Dissent peaked in the early 1980s under Paul Volcker. That was a period of double-digit inflation, and Mr. Volcker led the Fed to ramp up interest rates as high as 20 percent to bring it down.Though Mr. Volcker is widely credited with putting an end to that period of runaway price increases, his policies set off a recession and produced public outcry. He frequently clashed with President Reagan’s appointees on the Fed board.Mr. Powell has often invoked Mr. Volcker’s legacy.By the time Alan Greenspan took over as chair, inflation had come down substantially. Still, in the latter part of the 1990s, some feared the economy was running too hot and that inflation would once again become a problem.But Mr. Greenspan thought the United States was experiencing a productivity boom. In that scenario, strong growth was unlikely to be coupled with inflation and the Fed would not need to raise interest rates to cool the economy. His hunch turned out to be correct.As a result, “he was viewed as a legendary figure,” said Ellen Meade, a research professor at Duke University who was a senior adviser to the Fed’s board of governors until 2021.“The culture around dissenting shifted, I think in part because of people’s reverence for him,” she added, referring to Mr. Greenspan.Kevin Warsh, a former Fed governor who is seen as one of Mr. Trump’s top choices to succeed Mr. Powell, has said that he believes the United States is on the verge of a similar productivity boom today, necessitating a loosening of monetary policy. The opinion is in contrast with that of Mr. Powell, who has warned that the Trump administration’s tariff policy could be inflationary and has been cautious to cut rates.The trend of diminished dissents continued even after Mr. Greenspan’s tenure. During the Great Recession, this could have stemmed partly from a desire to present a united front to the public.“There may be more of a sense that expressing dissent on the inside, rather than voting dissent, is just preferable for the institution as a whole,” Dr. Meade said.This month, Mr. Waller said that he did not believe trade policy would lead to long-term inflation and said he would dissent at Wednesday’s meeting. Mr. Waller said he wished to return the Fed’s rate to “neutral,” meaning a level that neither speeds up nor slows down business activity.Ms. Bowman has dissented once before: Last September, she voted against the Fed’s decision to lower interest rates sharply — the first “no” vote by a governor since 2005. Explaining her rationale, she said that she was still worried about inflation and would have preferred a smaller cut.Along with Mr. Warsh, Mr. Waller and Ms. Bowman are possible contenders for Mr. Powell’s position when his term ends next May.