The Federal Reserve announced on Wednesday its decision to keep the interest rate unchanged in the range of 4.25% to 4.50%, marking the fifth consecutive hold.

The Federal Reserve is widely expected to keep interest rates unchanged on Wednesday, amid internal divisions over the future path of monetary policy, as President Donald Trump and other White House officials intensify pressure on the central bank.

Trump escalated that pressure on Wednesday morning, following the release of economic data showing US GDP grew at an annualized rate of 3% in the second quarter.

Writing on Truth Social, Trump said: “Too late, the rate must be cut now,” repeating the nickname he’s used this year for Fed Chair Jerome Powell.

Investors will be watching closely to see whether two Fed governors side with Trump and dissent from the monetary policy decision — something that hasn’t happened in more than three decades. Governors Christopher Waller and Michelle Bowman have both publicly made the case for a rate cut at today’s meeting.

Michael Feroli, chief economist at JPMorgan, said he expects Waller to dissent, noting that Bowman’s stance is less clear. “We doubt she’ll join him in an outright dovish dissent,” he added.

Wilmer Stith, lead bond portfolio manager at Wilmington Trust, said one dissent is more likely than two. But he noted, “Ultimately, it doesn’t change the fact that the Fed funds rate will stay put and the bank will remain patient. That’s the narrative.”

This raises another key question for investors: Will Powell hint in his afternoon press conference at openness to a rate cut in September? Traders are currently betting that the Fed will deliver its first rate cut of 2025 at the upcoming September 16–17 meeting.

Stith said he believes Powell may offer dovish language laying the groundwork for such a move, following months of criticism from Trump and other administration officials, who are now also pointing to the Fed’s $2.5 billion headquarters renovation project as further grounds to question Powell’s leadership.

“Given the cost overruns on the [Fed headquarters] project and the ongoing criticism from the administration, I think it weighs on the psyche. A politician might just crack the door open slightly. Before, the door was always shut,” said Stith.

Powell has defended the $2.5 billion renovation project, while also emphasizing in recent months the need for more time to assess the inflationary impact of Trump’s tariffs.

Many other policymakers agree with Powell, noting that inflation remains above target, inflation risks are still present, and the labor market is close to full employment.

Waller, however, has argued since the June meeting that the tariffs cause only one-time price increases — allowing the Fed to “look past them” and refocus on the employment side of its dual mandate.

He also voiced concern that private-sector job growth is nearing a “stall speed.” Other data point to rising downside risks in the labor market.

Bowman’s rationale for a rate cut lies in recent inflation readings that have come in below expectations, and her belief that trade policy will have only “modest effects” on inflation.

She also expressed concerns about labor market risks due to signs of weakening employment trends.

Bowman’s support for a rate cut marks a shift from her stance last fall, when she opposed a 50 basis point cut in September 2024, citing concerns that inflation was not yet under control.

It would be the first time since December 1993 that two Fed governors dissented in the same meeting. Back then, under former Fed Chair Alan Greenspan, Governors Wayne Angell and Lawrence Lindsey opposed the bank’s dovish policy and favored a rate hike instead.

Of the 61 meetings Powell has presided over, there have been 16 dissenting votes. Fourteen of those came from regional Fed presidents, and only two from Board governors.

In July 2019, there was a rare double dissent from regional Fed presidents, when the Powell-led Fed cut rates for the first time in a decade to counter uncertainty from Trump’s first-term tariffs.

Kansas City Fed President Esther George and Boston Fed President Eric Rosengren opposed that cut, arguing that rates should have been left unchanged.

Despite any potential dissents on Wednesday, most observers expect Powell to defend the Fed’s patient stance for the remainder of 2025.

“The Fed’s not going to do anything, and I think Powell will stick to his guns — he’s got, frankly, a strong footing to stand on,” said Christian Hoffmann of Thornburg Investment Management in comments to Yahoo Finance.

The Bank of Canada kept its key interest rate unchanged at 2.75% on Wednesday, citing the resilience of the Canadian economy despite the ongoing global trade war sparked by the United States.

Governor Tiff Macklem stated in pre-prepared remarks that the board’s decision was based on a “clear consensus.”

He explained that the Canadian economy has not experienced a sharp downturn despite significant trade uncertainty, and that core inflation remains relatively stable, even in the face of continued US tariffs.

This decision follows the bank’s choice to keep rates steady in both April and June, amid uncertainty stemming from global tariffs.

The move was in line with economists’ expectations ahead of the announcement.

Macklem noted that recent trade deals signed by the US with major global players such as Japan and the European Union have eased fears of a severe and escalating global trade war, and that the impact thus far has been less severe than initially feared.

Free Trade Unlikely to Return: Macklem

Although US President Donald Trump has recently signed new trade agreements, Macklem noted that these deals still include certain tariff levels.

He added that the nature of these agreements indicates the US is not reverting to a system of open free trade.

While some sectors have been heavily impacted by these tariffs, Macklem emphasized that challenges remain.

He said the Bank of Canada is closely monitoring how these tariffs affect business activity and demand for Canadian exports, and whether the higher costs from tariffs will be passed on to consumers.

The Bank of Canada cuts interest rates when it wants to stimulate the economy, but keeps borrowing costs elevated when inflation acceleration is a concern.

The central bank released its monetary policy report alongside Wednesday’s rate decision, but once again refrained from providing a single central forecast for economic performance, citing continued uncertainty.

Instead, the bank presented a baseline scenario based on current tariff levels, along with two alternative scenarios exploring the possibility of either easing or further escalation in tariffs. All three scenarios assume a continued presence of tariffs at some level.

While it remains difficult to determine the exact level of tariffs due to various exemptions and overlapping duties, the bank estimates that the effective tariff rate imposed by the US on Canada currently stands at around 7 to 8% — an increase of five percentage points since the start of the year.

Policymakers at the Bank of Canada assume that the vast majority of Canadian goods will eventually receive tariff exemptions in the coming years, thanks to compliance with the Canada–United States–Mexico Agreement, as companies accelerate efforts to obtain certification.

Under the baseline scenario, the Bank of Canada expects the economy to recover during the remainder of this year, following a 1.5% decline in seasonally adjusted annual real GDP in the previous quarter.

US stock indices rose at the start of Wednesday’s trading following the release of strong economic data, as investors also await the Federal Reserve’s policy decision.

Earnings results for Meta and Microsoft are set to be released after Wednesday’s session, with expectations of further improvement supported by continued investment in artificial intelligence.

Official data showed that real GDP in the United States grew by 3% during the second quarter, compared to a contraction of 0.5% in the first quarter. The figure also exceeded analysts’ expectations, which had pointed to growth of only 2.3%.

According to ADP data, the US private sector added 104,000 jobs in July, higher than the 64,000 expected. This compares with a revised reading for June showing a loss of around 23,000 jobs.

As for market performance, the Dow Jones Industrial Average rose by 0.1% (equivalent to 40 points) to 44,672 points by 15:48 GMT. The broader S&P 500 Index climbed 0.2% (equivalent to 14 points) to 6,384 points, while the Nasdaq Composite Index advanced 0.4% (equivalent to 91 points) to 21,190 points.