The Federal Reserve has remained inactive in five consecutive meetings, but two voting members support a rate cut, pointing out a slowdown in economic growth

Key Points:

The Federal Reserve continues to pause interest rate cuts as the market expected.

Among the FOMC voting members, Jerome Powell and nine others continue to support maintaining the status quo, while Christopher Waller and Michelle Bowman advocate for a 25 basis point rate cut this time.

Compared to the last statement, this time the wording about economic uncertainty has been removed, reiterating that uncertainty remains high, and it no longer states that "economic activity continues to expand steadily," but instead refers to "economic growth moderating in the first half of the year."

"New Federal Reserve News Agency": "Rarely" two members opposed, calling for an immediate rate cut, highlighting the fracture in consensus among Fed policymakers regarding the impact of tariffs.

Economists believe this statement is more dovish than expected, increasing the likelihood of a rate cut in September, and the PCE and non-farm employment data to be released this week may exacerbate the divisions within the Fed.

Despite U.S. President Donald Trump recently personally urging a rate cut, officials from the Trump administration and Republicans have repeatedly pressured the Fed through the "renovation gate," yet the Fed remains unmoved. However, this time, the Fed has revealed the largest internal disagreement regarding rate cuts since it began its rate-cutting cycle last September, along with a dovish adjustment in its economic activity statements.

On Wednesday, July 30, Eastern Time, the Federal Reserve announced after the FOMC meeting that the target range for the federal funds rate remains at 4.25% to 4.5%. Thus, the FOMC has decided to pause actions for five consecutive monetary policy meetings. The Fed has cut rates in three consecutive meetings since last September, totaling a reduction of 100 basis points, and has maintained the status quo since Trump took office in January.

The decision of this meeting was entirely within investors' expectations. By Tuesday's close, CME tools indicated that the futures market expected a nearly 98% probability that the Fed would keep rates unchanged this week, with a nearly 65% probability of a rate cut at the next meeting in September. Even before the Fed's decision was announced on Wednesday, U.S. Treasury Secretary Steven Mnuchin and Trump himself anticipated that the Fed would not cut rates this time.

Compared to the rate cut, the internal divisions within the Fed became a more significant focus of this decision. Two Fed officials supported a rate cut at this meeting. This is the highest number of dissenting votes in an FOMC rate decision since the Fed began its rate-cutting cycle ten months ago.

Nick Timiraos, a journalist known as the "New Federal Reserve News Agency," commented that it is "rare" for two officials to oppose maintaining the current rate, calling for an immediate rate cut. These dissenting opinions highlight the fracturing consensus among Fed policymakers when discussing the impact of tariffs on the economy and inflation.

Anna Wong, Chief U.S. Economist at Bloomberg Economics, believes this is the first time since 1993 that two Fed governors have disagreed with the decision. This internal division appears quite pronounced, and perhaps as a compromise, this policy statement is more dovish than the institute expected, noting that economic growth has moderated in the first half of this year.

Wong expects that the U.S. core PCE inflation data for June, to be released on Thursday, and the non-farm employment data for July, to be released on Friday, may further exacerbate the divisions within the FOMC. Bloomberg Economics believes that most FOMC members will not have enough confidence that inflation is moving in the right direction until the end of this year, but this dovish statement suggests that the likelihood of a rate cut in September is increasing

Waller and Bowman Advocate for a 25 Basis Point Rate Cut

The Federal Reserve's decision statement largely retained the content of the last FOMC meeting statement from June. There are three main changes, the most notable being that among the 11 members voting at this FOMC meeting, two voted against the decision to pause rate cuts. This marks the highest number of dissenting votes since the Fed has continuously paused rate cuts this year.

The decision statement shows that nine FOMC members, including Fed Chair Jerome Powell, continued to vote in favor of keeping interest rates unchanged. The two dissenting votes came from Federal Reserve Governor Christopher Waller and Bowman, the Fed's Vice Chair for Supervision nominated by Trump. Both advocated for a 25 basis point rate cut at this meeting.

Waller and Bowman's dissenting votes were not entirely unexpected. Since the June Fed meeting, Waller has publicly called for a rate cut in July several times, and Bowman had also indicated earlier this month that she was prepared for a rate cut as early as July.

Timiraos pointed out that Bowman's dissent marks a significant shift, as she has been a major advocate for tightening monetary policy in recent years and opposed rate cuts when the Fed initiated them last September.

Timiraos suggested that Waller's support for a rate cut seems to be an effort to be nominated by Trump as the next Fed Chair. This is because he expressed support for a rate cut two weeks ago, coinciding with the timeline for the primary selection of the next Fed Chair. This month, Waller stated concerns that interest rates are too high for an economy lacking inflationary momentum, which aligns with the views of some economists and former Fed officials.

Removal of "Economic Uncertainty Has Decreased," Reaffirming "Uncertainty Remains High" and Stating Economic Growth Has Moderated in the First Half

The other two changes in the Fed's decision are related to the economy. One of them concerns the language regarding uncertainty in the economic outlook.

The last meeting statement in June stated that "uncertainty regarding the economic outlook has decreased, but remains high." The current statement removed the assertion that uncertainty has decreased and directly reaffirmed that uncertainty remains high, stating:

"Uncertainty regarding the economic outlook remains high."

Following this statement, the current declaration reiterated that the FOMC is focused on the two-sided risks it faces in achieving its dual mandate of maximum employment and price stability.

Another change occurred in the commentary on economic activity. The last meeting statement said: "Although net exports have affected the data, recent indicators show that economic activity continues to expand robustly." The current statement changed this to:

"Although net exports have affected the data, recent indicators show that economic growth was moderate in the first half."

In other economic commentary, the current statement continued to reaffirm that the unemployment rate in the U.S. remains low, the labor market is robust, and inflation remains elevated.

Kathy Bostjancic, Chief Economist at Nationwide, commented that the Fed's statement removing the previous language suggesting that economic uncertainty had decreased, and merely stating that uncertainty remains high, surprised her Despite the high level of uncertainty, this uncertainty has significantly decreased considering the increasing clarity regarding trade and tariffs.

In addition, this statement continues to reiterate that the Federal Reserve will continue to reduce its holdings of U.S. Treasury securities, agency debt, and agency mortgage-backed securities (MBS).

Starting from April of this year, the Federal Reserve has further slowed the pace of its balance sheet reduction (quantitative tightening, QT). Specifically, it has lowered the monthly redemption cap for U.S. Treasury securities from $25 billion to $5 billion, while keeping the monthly redemption cap for agency debt and agency MBS unchanged at $35 billion.

Subsequently, the Federal Reserve has not made any changes to the balance sheet reduction guidance in the last three consecutive meetings, indicating that the reduction will continue at the above pace.

The following red text highlights the deletions and additions in this resolution statement compared to the last one.