What The FOMC Meeting Tells You: Two Vote For Rate Cut In Biggest Split For Decades

The Federal Open Market Committee (FOMC) concluded its July 30, 2025, meeting by holding the federal funds rate steady, but the decision wasn't unanimous. Two governors, Michelle Bowman and Christopher Waller, dissented, advocating for a 0.25 percentage point rate cut.

This marks the first dual dissent since December 1993, signaling a potential fracture within the typically unified central bank.

The FOMC maintained the target range for the federal funds rate at 4.25% to 4.5% for the fifth consecutive meeting. The majority cited persistent inflation and a stable labor market as justification for holding steady. However, Bowman and Waller voiced concerns about moderating economic growth and potential risks to employment.

Following the announcement, short-term Treasury yields rose, and the U.S. dollar strengthened as traders scaled back expectations for an imminent rate cut.

Federal Reserve Chair Jerome Powell emphasized a data-dependent approach, stating that it was premature to predict a rate cut in September. He highlighted ongoing economic uncertainties and the need to monitor the effects of tariffs on inflation. Powell's perceived hawkish tone tempered market enthusiasm for near-term easing.

The Fed's decision arrives amidst political pressure from President Donald Trump, who has publicly advocated for rate cuts to stimulate the economy and reduce federal debt costs. Despite this pressure, the Fed has maintained its commitment to independence and its dual mandate of maximum employment and price stability.

Bull Case:

• The dissent indicates growing awareness within the Fed of potential downside risks to the economy.
• Even without a rate cut, the Fed's acknowledgment of moderating growth suggests a willingness to pivot towards easing if economic conditions worsen.
• A data-dependent approach means that weaker-than-expected economic data in the coming weeks could still pave the way for a September rate cut.

Bear Case:

• The majority of the FOMC remains committed to fighting inflation, even at the expense of slower economic growth.
• Powell's hawkish comments suggest that the bar for a rate cut is high, and the Fed is unlikely to ease policy unless inflation shows significant signs of cooling.
• Political pressure from the White House could undermine the Fed's credibility and further complicate the policy outlook.

Recent economic indicators point to moderating growth, as noted by the FOMC in its statement. While the unemployment rate remains low and labor market conditions are solid, inflation remains somewhat elevated, contributing to the Fed's cautious stance.

The Committee is currently reviewing its longer-run strategy and may update its policy framework by late summer. This review could lead to significant changes in how the Fed approaches monetary policy in the future.

While the majority opted to maintain the current rate, the dissenting votes signal growing concerns about economic momentum and potential risks to employment. The next FOMC meeting in September will be crucial in determining whether the dissenting voices will gain traction and influence the direction of monetary policy.