Fed holds rates steady, rare dissent highlights policy divide

The Federal Reserve left its benchmark interest rate unchanged at 4.25%–4.50% for the fifth consecutive meeting, adopting a cautious approach after reducing rates by 100 basis points in late 2024.

In an unusual move, two voting members Michelle Bowman and Christopher Waller dissented, advocating for a 25 basis point cut. This represented the first dual dissent from Fed governors since 1993.

The post-meeting statement saw minimal changes, with the Fed now describing economic growth as "moderated" in the first half of the year, down from the prior "solid pace." Labor market conditions are good, and inflation is still considered as "somewhat elevated."

Despite external pressure for easing, most officials see no urgency to cut further, given inflation remains above the 2% target and employment remains firm. The Fed reiterated that uncertainty remains high and policy will remain data-dependent.